One Crude Dude

With Big Oil reeling from the Prudhoe Bay shutdown, Chuck Hamel can finally say 'I told you so.'

Last December, Chuck Hamel and his wife celebrated the holidays as they always do, at their home in Marysville. They ate Christmas dinner, sipped wine, took long walks, and watched their goddaughter’s children play. It was pleasant and calm, unlike Hamel’s racing mind. His thoughts were jumbled with tales of oil, corruption, and conspiracy. As the holidays wound down, Hamel returned to what he does best: sniping at one of the world’s most powerful industries, Big Oil.

On New Year’s Day, he drove to Sea-Tac and boarded a jet bound for Anchorage, Alaska. When he arrived, Hamel went to a “safe house,” as he describes it—a friend’s place where nobody would find him. There, he met with one of his informants, an employee of oil giant BP. They talked about how the London-based company was neglecting its pipelines in Alaska, which are literally rusting away on the tundra. While BP has spent hundreds of millions of dollars trying to prevent corrosion, some oil workers claim the company has skimped dangerously when it comes to maintaining the aging equipment that supplies crude to the West Coast.

Hamel, who lives for such gossip, assured the BP informant his identity wouldn’t be revealed. That sealed the deal. Together, they phoned a criminal investigator at the U.S. Environmental Protection Agency’s Seattle division and gushed. This exchange, coupled with numerous allegations made by Hamel and his moles in recent years, would foreshadow the biggest meltdown in Alaska’s oil industry since the Exxon Valdez tanker ran aground in 1989. Last March, one of BP’s corroding pipes leaked 267,000 gallons of oil at Prudhoe Bay, the nation’s largest oil field. On Aug. 6, BP shut down its Prudhoe Bay facility—which accounts for 8 percent of the country’s domestic oil production—after discovering that another corroding pipe, this one peppered with small holes, was oozing crude onto the spongy tundra. BP has since restored production to just over half of Prudhoe Bay and plans to replace 16 miles of worn pipeline at an estimated cost of $170 million.

For Seattle and other Northwest cities that depend on Alaska crude, BP is making up the shortfall by shipping oil from West Africa to its Cherry Point Refinery in Blaine, Wash. Time will tell if the company’s troubles will show up at the gas pump.

Meanwhile, two federal agencies— both spurred by Hamel and his whistle-blowers—are probing BP’s conduct, and the U.S. Justice Department confirms its own investigation. The company has been hit with a slew of federal and state subpoenas to surrender internal documents on its corrosion program. And a congressional committee plans a hearing Sept. 7 to question BP executives about Prudhoe Bay’s mishaps.

Hamel looks like your grandfather. He’s 76, short and stocky, with fluffy white hair and bushy eyebrows. He and his wife, Kathy, split their time between a townhouse in Alexandria, Va., and her childhood home on Seventh Street in Marysville, which Kathy inherited from her folks. This modest, three-bedroom abode north of Seattle is a retreat from Hamel’s ongoing war with BP. If it weren’t for the recent spills at Prudhoe Bay, you’d probably find the Hamels strolling along Potlatch Beach or watching the Mariners lose to Oakland.

Instead, Hamel sits in his Virginia den overlooking the Potomac River, telling anybody who’ll listen that he and his band of BP whistle-blowers long warned company officials and government regulators that Prudhoe Bay was falling into perilous disrepair. If you haven’t heard of Hamel, it’s because he’s not the typical activist. You won’t find him whining about Starbucks or protesting WTO summits. He doesn’t represent any environmental groups. Rather, his cause is personal, fueled by pride, vindictiveness, and a profound loyalty to whistle-blowers who risk their livelihoods by sharing stories of Big Oil misconduct. This one- man show delivers a powerful punch, particularly when it comes to the issue of oil exploration in the Arctic National Wildlife Refuge. Environmentalists have argued that if Prudhoe Bay has problems, then oil companies should not be trusted to drill on ANWR’s coastal plain.

Hamel, in short, is the Ralph Nader of Alaska oil, a determined watchdog who once owned oil leases and shipped crude. When he suspected that a supplier lied to him about water in his oil shipments, he turned on the industry. He anointed himself the unpaid voice for fed-up oil workers—a whistle-blower for whistle-blowers. Just as General Motors hired private detectives to discredit auto industry critic Nader in the 1960s, Hamel found himself a target of an industry-engineered sting. During the 1980s and the 1990s, he revealed years of neglected maintenance and pollution in the oil industry. His delving prompted companies to spend hundreds of millions of dollars patching things up.

Some government regulators and oil executives claim Hamel is nothing more than an attention-seeking gadfly, a bully with a chip on his shoulder. They speculate his true motive is to extort money from the industry, a decades-old accusation that Hamel firmly refutes. Other critics argue that he spins half-truths to reporters hungry for a conspiracy.

“To say that he’s predicted something bad’s going to happen at Prudhoe Bay is like somebody constantly saying the stock market’s going to crash,” says Larry Dietrick, a director at the Alaska Department of Environmental Conservation. “Sure, if you say it all the time, you’ll be right someday—the market will crash. But does that mean you predicted it?”

Perhaps Dietrick’s envious of Hamel because he’s feeling left out. While his environmental agency comes under attack for allegedly going soft on BP and its corrosion problems, reporters from London to Los Angeles have lionized Hamel as a sort of David vs. Goliath folk hero. A week after BP closed Prudhoe Bay, Hamel was beaming devilishly in the spotlight.

“The only break I’ve gotten [from reporters] was when those bombers got caught in London,” he says. “If it hadn’t been for them, I’d have been a wreck. Speaking of which, you didn’t give my cell number to Anderson Cooper, did you?”

I met Chuck Hamel in the fall of 2001, when I was covering the oil industry for the Anchorage Daily News. He swung by the newspaper’s office carrying a worn leather briefcase, trolling tales of corporate cutbacks at Prudhoe Bay.

BP runs Prudhoe Bay on behalf of itself, ConocoPhillips, ExxonMobil, and others. The field, a sprawling maze of crisscrossing pipes, flow stations, and manifold buildings, sits on one of the most forbidding perches in the world, just south of the Arctic Ocean. In summer, waterfowl fill the sky, and you often see caribou sauntering between the pipelines. In winter, Prudhoe Bay is cast in several months of absolute darkness. Workers watch their backs for polar bears, but more often they’re worried about frostbite. Temperatures sink to minus 40 or colder. Prudhoe Bay’s oil production has been rapidly declining for the last 16 years, and Hamel and his insiders contend that BP doesn’t want to spend money to maintain the dying oil field, instead treating Prudhoe Bay like an old car. Why spend money fixing a leaking transmission when you know you’re going to have to buy a new car eventually?

When asked about Hamel’s accusations, BP officials claim they were aware of the issues and were already addressing them by the time he’d blown his whistle. Still, there were instances when BP was caught off guard. In early 2002, for example, managers discounted a faulty valve on a Prudhoe Bay oil line. When Hamel’s insiders proved it was leaking—and made it public through their protector—BP was forced to shut the pipeline down and repair the valve. That incident alone cost BP tens of thousands of dollars.

In press maven mode, Hamel can be tiresome, especially when he calls on deadline. If a reporter turns down his story of the day, he’ll sometimes snap, “Fine, if you don’t want it, then I’ll give it to The Wall Street Journal.” A few days later, there the article will be, sometimes on the front page.

Raised in the small community of Watertown, Conn., Hamel led a life of political hobnobbing and international shipping before tangling with the oil industry. He likes to say that U.S. Sen. Hubert H. Humphrey helped him land his first job in politics—part-time elevator operator at the nation’s Capitol. Hamel progressed to intern for Humphrey’s future boss Lyndon Baines Johnson, when the president was still a Texas senator. In the early 1970s, Hamel served as executive assistant to then–U.S. Sen. Mike Gravel of Alaska, who’s recently re-emerged as a Democratic candidate for the 2008 presidential election. While working for Gravel, Hamel met his wife, Kathy Morgan, who was a secretary for Henry “Scoop” Jackson, the beloved Washington senator.

As a businessman, Hamel brokered international shipments of corn, wheat, and oil. He oversaw ships hauling American grain to India, Bangladesh, and Pakistan. After they made their deliveries, crews flushed out the holds, then picked up oil in Saudi Arabia and delivered it to Texas. Hamel says he earned up to $100,000 a month and owned a condo in Florida and a ski chalet in Sun Valley, Idaho.

Hamel’s time with Sen. Gravel introduced him to Alaska and the 1970s oil boom. Wildcatters had struck oil at Prudhoe Bay a few years earlier. Alaska, once considered a backwoods territory, suddenly was sitting on top of America’s biggest oil deposits. Thousands of roughnecks, pipe fitters, and laborers descended on the state, constructing the 800-mile-long Trans-Alaska Pipeline and a tanker terminal in the coastal town of Valdez. Hamel acquired interests in oil leases and began brokering crude to the Lower 48. He was an anomaly— a small fish competing with the biggest oil companies in the world. And it wasn’t long before the industry wished him gone.

In 1979, Hamel was dumbfounded when he learned that one of his Alaska oil shipments contained too much water. His clients felt like they’d been served a bourbon and water, sans bourbon—and consequently told Hamel to stick it. It was a frustrating ordeal that Hamel says cost him millions.

He began to suspect that the Alyeska Pipeline Service Co. purposely diluted his crude. Alyeska is a consortium of oil companies—led by BP—that operates the Trans-Alaska Pipeline and the Valdez tanker terminal. In the early 1980s, Hamel went to Valdez, where many Alyeska employees lived and worked. His life’s course turned on a dime. He checked into a hotel and got word out that he was looking for insider information on Alyeska’s operations. Oil workers called and knocked on his door at all hours, and they told him Alyeska had doctored records to hide the water in his oil, an allegation Alyeska denied and Hamel never proved. But when they unveiled another claim—that the industry was excessively polluting the water and air around Alaska’s Prince William Sound—Hamel gushed with anger. The oil companies were not only cheating him, he surmised, they were cheating Alaska.

Over time, Hamel became the go-to guy for oil workers too fearful of industry retaliation to talk publicly, yet too worried for the environment and their safety to remain silent. For the next 15 years, Hamel and his insiders called attention to weak pollution oversight and a host of problems with the pipeline and tanker terminal. As a result, Alyeska would spend hundreds of millions of dollars reducing vapors and oily discharges and upgrading the pipeline—but not before trying to catch Hamel at his own game.

Alyeska management believed Hamel was dogging them in anticipation of a big payout. To wit, in the mid-1980s, Hamel told the company he’d walk away from the imbroglio if compensated for the $12 million in losses he claimed to have suffered. But at the time, then–Alyeska executives wanted to squash him.

In 1990, Alyeska launched a $200,000 sting operation to try to lure Hamel into divulging the names of his whistle-blowers, as well as revealing how he was obtaining internal company documents. For this, Alyeska hired Wackenhut Corp., which assigned detectives to rummage through Hamel’s trash and eavesdrop on his phones calls and snatch his mail. They spied on his wife and even his father-in-law, who lived in Marysville.

Instead of discrediting Hamel, Alyeska leaders bruised their own reputations when the snooping became public a year later. A federal judge described the spying as “reminiscent of Nazi Germany,” and Congress cracked the whip, calling for stiffer industry oversight and a government review of pipeline operations, which yielded thousands of problems. Hamel sued Alyeska over the spying and won an undisclosed settlement.

At the same time he was fighting Alyeska, Hamel was enmeshed in a dispute with Exxon, which he accused of cheating him out of lucrative oil leases in Alaska. After he sued the oil giant and lost, he was forced to file for bankruptcy in 1998. Hamel claimed he was nearly $2.3 million in debt, which included more than $850,000 in legal fees from the Exxon case. On top of that, Exxon lawyers managed to make public that he earned no income and had no bank accounts, and that his wife paid all of his living expenses, according to court filings.

Broke and battered, Hamel nonetheless felt compelled to continue helping oil grunts. Alyeska insiders still came to him with concerns, as did a new crop of whistle-blowers.

In the late 1990s, workers at BP began groaning about problems at Prudhoe Bay. Citing corroding pipelines, leaky valves, faulty fire-detection systems, and other equipment problems, the employees claimed BP leaders had allowed the oil field to slip into ill repair as they slashed maintenance budgets, reduced staffing levels, and stopped inspecting crucial systems that control and prevent oil spills and explosions. The workers told Hamel that their attempts to discuss these concerns with BP managers and state regulators fell on deaf ears.

“When somebody asks you to help them reveal the malfeasances going on at the country’s biggest oil field, how do you say no?” explains Hamel. “I had to help these guys.”

He re-entered the battlefield with fresh ammunition: BP was on probation, stemming from an incident in which a contractor dumped thousands of gallons of toxic material underground at a BP oil field in Alaska during the late 1990s. It was one of the worst environmental crimes in the history of Alaska oil development. BP pleaded guilty to a single felony in connection to the incident, admitting that it took too long to notify federal regulators about the dumping. The company paid $6.5 million in civil penalties and agreed to set up a vast environmental management program, which ultimately cost about $40 million.

BP was placed on five years probation, beginning in 2000. When the company’s executives reported to their probation officer in Anchorage, they had to wait in the same lobby as convicted drug felons. Hamel passed further allegations to the P.O., who investigated them. These included a claim that a Prudhoe Bay valve shown to leak in 1998 wasn’t repaired until four years later. Further allegations included faulty fire-detection systems and delays in installing a system to spot oil leaks in huge trunk lines.

Hamel’s claims drew international media coverage, leaving people wondering just how committed BP was to the environment. At the time, marketers were reshaping the corporation’s image. They developed the moniker, “Beyond Petroleum,” and began portraying BP as a green company supportive of alternative energy. The company ran ads in glossy magazines with slogans like, “It’s time to think outside the barrel.”

In 2001, Hamel scored when BP took the unusual step of conducting an internal assessment of how its workers felt about the company, then released the results publicly. The audit, among other things, found that employees believed “management’s top priority was controlling costs and achieving short-term budget targets”—not safety and regulatory compliance.

After a 2002 explosion seriously injured a BP employee, Alaska regulators fined the company $1.3 million. The next year, a federal judge ordered the company to allow government regulators unrestricted access to its oil facilities and records to verify it was complying with environmental and safety laws. Still, BP successfully completed its probation last year. Hamel couldn’t claim a clear victory—not yet.

Last March, a worker was driving around Prudhoe Bay when he saw the frozen tundra drenched with several thousand barrels of oil. Unbeknownst to BP management, one of the company’s transit pipelines had become corroded and had been leaking for days. What resulted was the biggest spill ever recorded in an Alaska oil field. Then, after another corroded pipeline caused a small spill this month, BP temporarily shut down Prudhoe Bay. BP has been slowly restoring oil production to the 400,000-barrel-a-day field.

The oil industry has been fighting rusting machinery for decades in northern Alaska. Until this year’s spill, state regulators often lauded BP for running an exceptional program to monitor and prevent corrosion. In general, the company has combated rust by flushing pipes with inhibitors, using ultrasonic testing to look for weak spots in the pipeline walls, and by sometimes running what are called “pigs”—bullet-shaped machines—through the lines to remove sludge and to check for corrosion.

But after the most recent spill, BP leaders acknowledged their program wasn’t up to snuff. They admitted the company hadn’t “pigged” the corroded pipeline since 1992. They believe an acid-producing bacteria ate holes in the steel. “We realize our [corrosion] monitoring program wasn’t good enough, and we will adjust the program to make it better,” says BP spokesperson Neil Chapman.

Not surprisingly, Hamel believes BP could have prevented the spills and presents correspondence with BP executives, in which he warned the company in 2004 that corrosion was out of control at Prudhoe Bay. In one letter, Hamel tells Dr. Walter E. Massey, chairman of BP’s environmental committee, that workers were worried that corrosion and cutbacks would lead to a “catastrophic event.” Massey and other BP officials pressed Hamel for specifics, but Hamel claims all they wanted were the names of his informants. When asked whether BP looked into Hamel’s claims, Chapman responds, “It’s not about individuals, it’s about safely producing energy and protecting the environment.” Last year, Hamel took his whistle-blowers’ accusations to the EPA, which, he says, has launched an ongoing probe. EPA officials neither confirm nor deny the investigation. Federal pipeline regulators are also looking into BP’s practices, and the Justice Department is conducting its own grand-jury investigation.

Hamel’s opponents are hobbled and embarrassed. BP shareholders have sued company leaders, alleging they knew corrosion was out of hand. Some workers are openly criticizing their employer. “They were playing Russian roulette,” said Marc Kovac, a longtime BP employee who lives in Alaska, in an e-mail last week. “They increased the risk to our workers. They damaged BP’s business. America’s greatest energy asset was managed into the ground, literally.” Even U.S. Sen. Ted Stevens of Alaska—a staunch supporter of oil drilling in ANWR—is infuriated, publicly demanding that BP executives explain themselves.

Hamel, meanwhile, is delighted. He says 60 Minutes and Good Morning America have been hounding him: “60 Minutes wants to do two shows on me. Two shows! Can you believe that?” Recharged after a few days of rest, Hamel’s ready to drop another bomb on BP, but he isn’t ready to share details. “You’ll find out soon enough,” he snickers.