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NEWS BULLETIN

November 09, 2012 --- Vol. 18, No. 86November 2012

BP Alaska to pay state $255 million for spills, production shortfalls in 2006

A three-member arbitration panel has ordered BP Exploration (Alaska) Inc. to pay the state of Alaska $245,410,959 in royalty damages for North Slope production shortfalls related to oil pipeline leaks in 2006.

State officials say BPXA also will pay an additional $10 million to settle civil assessments for the spills.

The state filed a civil suit against BPXA in March 2009, seeking to recover tax and royalty revenue it claimed it would have collected had it not been for the spills and subsequent production shut-ins and pipeline repairs. The state said leaky pipelines in the BP-operated Prudhoe Bay field were the consequence of corrosion and neglect.

A judge threw out the state’s tax claim, hugely reducing BP’s potential liability, and the two sides agreed to submit the royalty claim to binding arbitration.

The arbitrators signed their 35-page ruling on Oct. 31. The arbitrators were Mark Kantor, of Washington, D.C.; Thomas W. Reavley, of Austin, Texas; and tribunal chair Thomas J. Brewer, of Seattle.

The arbitrators focused on the state’s claim of lost or deferred production of crude oil and natural gas liquids on state leases at the Prudhoe Bay unit and the related Greater Point McIntyre area.

BPXA has partners in these properties, the main ones being ConocoPhillips and ExxonMobil.

BPXA issued this statement on the arbitration outcome:

“We are pleased to finally resolve the last remaining claim from the 2006 Prudhoe Bay spill. Our share of the judgment is approximately $66 million. With this behind us we can now move forward, operating North America’s largest oil field in a safe, reliable and compliant manner to the benefit of Alaska and the rest of the United States.”

—Wesley Loy

See story in Nov. 18 issue, available online Friday, Nov. 16 at 11 a.m. at PetroleumNews.com

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