The requested stay would “allow the parties to proceed with an arbitration of the present dispute,” says a Dec. 29 filing in state Superior Court in Anchorage.

The presiding judge has not yet ruled on the request.

The state sued BP Exploration (Alaska) Inc., operator of the giant Prudhoe Bay field, in March 2009. The suit sought a range of fines and damages, including back taxes and lost royalties, for a production shortfall of at least 35 million barrels of oil resulting from two spills and shut-ins to repair or replace leaky, corroded pipelines.

The suit alleged negligence on the part of BP, and aimed to collect perhaps $1 billion.

But BP has made considerable progress in fighting the suit, winning a Dec. 10, 2010, ruling that threw out the state’s tax claims.

Steven Mulder, a state assistant attorney general, told Petroleum News yesterday that the state and BP now plan to arbitrate the issue of the amount of the state’s royalty income damages.

“This binding arbitration path resolves the disputed claims in the litigation,” Mulder said in an email. “The court case will be stayed until the arbitration is competed or the royalty damages claims are settled.”

A three-member arbitration panel “will be asked to award an amount to compensate the State for the royalties it did not receive due to the 2006-08 pipeline corrosion and replacement events,” Mulder said.

He added: “The arbitration will focus on whether BP ‘made-up’ the lost production shortly after putting into service replacement pipelines or whether the production opportunity lost in 2006-08 will not be realized until the end of field life, if ever, due to known gas and water handling constraints.”

—Wesley Loy

See story in Jan. 15 edition, available online at 11 a.m. Friday, Jan. 13 at www.PetroleumNews.com