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Alyeska CEO Steps Down Following Truthout Exposé

Last updated: July 7, 2010

Source: Truthout

Kevin Hostler, the chief executive officer of Alyeska Pipeline, informed company employees Wednesday morning that he “plans to retire to Houston and to spend time with his family.”

The announcement comes one day after Truthout published an extensive investigative report that was highly critical of his leadership of the company and revealed details, based on hundreds of pages of internal documents and in interviews with more than a dozen senior employees, of severe cost-cutting measures Hostler implemented that threatened the safety and integrity of the pipeline.

Click here to listen to Jason Leopold discuss Truthout’s groundbreaking report  on Alyeska and Kevin Hostler’s decision to step down from the company on Public News Service.

According to one email, “the budget cuts over the last couple of years is creating a large ‘bow wave’ of deferred projects and program work … The oversight of the integrity of the system is at risk.”

“Reductions in the budgets for the Aboveground [pipeline] program; fuel gas line; and mainline pipe can place the integrity of the system at risk,” the email says. “There is a risk ranking exercise that is used and the concern that the risk ranking is being used primarily for budget reductions and although work is shown as lower risk it still should be done to protect the environment.”

The employee who wrote the email alleged that Alyeska’s 2010 budget was cut from $680 million to $600 million on orders from BP.

Over the past several months, Alyeska Pipeline and Hostler have been under intense scrutiny by a Congressional oversight committee and an independent investigator, who has been probing explosive allegations leveled by managers that severe cost-cutting efforts could put the integrity of the 800-mile Trans-Alaska Pipeline System (TAPS) at risk.

TAPS transports crude oil from production fields in Prudhoe Bay to Valdez for deepwater tanker loading. It moves anywhere from 600,000 to 700,000 barrels of oil per day, which represents approximately 15 percent of US crude oil production.

Last week, as Truthout first reported, Hostler was called into Washington for the second time in a month to meet with staffers from Rep. Bart Stupak’s office. Stupak (D-Michigan) is the chairman of the House Energy Committee’s subcommittee on oversight and investigations.

The meeting focused on the circumstances behind several mishaps, including a recent oil spill that took place at one of Alyeska’s pump stations on the North Slope, which forced the company to shut down TAPS for more than three days in May, and the loss of communication connections used to control pumps and valves at the northern end of pipeline system that also forced its temporary closure.

Staffers also queried Hostler about the findings of an investigation conducted by attorney Charles Thebaud, of the Washington, DC law firm Morgan, Lewis & Bockius. Thebaud launched his probe in February after some Alyeska managers anonymously filed complaints with BP’s Office of the Ombudsman about a number of issues, including failures to address matters concerning safety and maintenance and a controversial decision Hostler made last year to relocate about 30 safety and integrity management engineers from Fairbanks to Anchorage, Alaska – hundreds of miles away from the pipeline.

In a statement Wednesday, Stupak said, “In our committee’s staff meeting with Mr. Hostler last week, we expressed serious concerns about a recent internal report showing significant issues with the management culture at Alyeska.”

“That report found widespread dissatisfaction among employees of Alyeska regarding decisions made by management and the management style within the company,” Stupak said.

In a three-page “talking points & timeline memo” distributed to employees Wednesday morning, Hostler acknowledged that Thebaud’s probe, as first  disclosed by Truthout “could potentially create a distraction.”

A copy of Thebaud’s report will not be shared with employees, the talking points memo states, “due to the need to preserve the confidentiality of open work environment investigations.”

The memo further added that “Alyeska management does not have the original report. A modified version of the report that did not include names of individual details was provided to Hostler.”

Hostler’s management style has been criticized by dozens of employees. According to a copy of a confidential employee work survey obtained by Truthout, Hostler was described as “a narcissistic despot who will be remembered for his management style of intimidation and fear.”

“At the senior management level, [Hostler] has made a mockery of the [Open Work Environment] system by neutering our VPs and Directors who are openly afraid to disagree with his initiatives, even when it is detrimental to TAPS,” says a copy of the survey.

Other surveys provided to Truthout contained similar descriptions of Hostler.

Alyeska summarized the report’s findings to employees in a company-wide email distributed June 30 obtained by Truthout.

“Most of the concerns were not substantiated,” says the email sent to employees, obtained by Truthout. “Specifically, the concerns about safety, integrity and environmental protection were not substantiated.”

However, “the investigation did conclude that there are opportunities to improve the Open Work Environment,” says the email signed by TAPS owners Charles J. Coulson of BP Pipelines (Alaska) Inc., Bij Agarwai of ConocoPhillips Transportation Alaska Inc., Gary Pruessing of ExxonMobil Pipeline Company, Michelle West of Koch Alaska Pipeline Company and Jim Avioli of Unocal Pipeline Company. “This is consistent with the recent employee survey that demonstrated there has been a reduction in employee comfort in reporting concerns to senior management.”

Alyeska spokeswoman Michelle Egan said the company’s “Business Practices/Employee Concerns program (which recently merged with our Compliance and Ethics Group) will develop a plan for enhancing the open work environment” to deal with issues of intimidation and fear.

Alyeska employees told Truthout that the announcement about Hostler’s exit was made during a meeting this morning after Truthout’s story was circulated and resulted in additional media inquiries.

Truthout obtained a copy of the company-wide email sent to employees following the meeting. It said Hostler will exit the company September 30. The announcement said “Hostler previously told employees he planned to leave the company at the end of 2010.”

“Retiring at the end of September is good for TAPS and allows enough time for a proper transition,” Hostler said in an email distributed to Alyeska employees on Wednesday. “Our executive team and other Alyeska leaders have worked toward developing leadership skills so that any transition in the organization is seamless.

A successor to Hoslter has not been named.

Stupak encouraged the owners of Alyeksa “to take very seriously the findings of their [Thebaud’s] report as they begin the process of determining a new management structure for the company going forward.”

“There are significant issues that need to be address to increase morale and ensure safety of the Trans Alaska Pipeline and I expect that they will find someone with the character and management style to move the company forward,” Stupak said.

BP is the largest shareholder of Alyeska and Hostler is a BP executive “on loan” to the company. BP exerts significant control and influence over the way Alyeska is operated, senior BP and Alyeska officials said.

Prior to being named chief executive of Alyeska, Hostler spent 27 years with BP, most recently as senior vice president of BP’s global human resources organization. Before that, Hostler was head of BP’s subsidiary in Colombia.

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