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Lawyers in 2 big cases seek new results State of Alaska asks judge to reconsider decision limiting claims against BP; pipeline owners try to poke holes in costly tax ruling Wesley Loy For Petroleum News
Lawyers in two high-stakes court battles pitting the oil industry and the state are asking the judges in the respective cases to reconsider recent key rulings.
In the case of State of Alaska vs. BP Exploration (Alaska) Inc., attorneys for the state want Superior Court Judge Peter Michalski of Anchorage to reverse his June 11 dismissal of part of the civil suit brought against the company for the 2006 Prudhoe Bay pipeline spills.
In the other case, which concerns the taxable value of the trans-Alaska oil pipeline, the line’s five energy company owners are asking Superior Court Judge Sharon Gleason to reconsider parts of her May 24 ruling that doubled the system’s value for the disputed 2006 tax year.
State tries to regain ground Lawyers for the state, in a six-page filing on June 21, ask Michalski to reconsider his dismissal of the state’s negligence claim for what the judge termed “special damages,” the taxes and royalties the state argues it lost because of production shut-ins following leaks from corroded Prudhoe Bay pipelines. The state has cited a production shortfall of 35 million barrels of crude oil and natural gas liquids.
BP operates the field on behalf of itself and other owners ConocoPhillips, ExxonMobil and Chevron.
Michalski held that the state may pursue those special damages as a contract claim — the contract being the oil field leases and unit agreements between BP and the state — but not as a negligence or tort action, as the state sought to do in its lawsuit.
The judge’s ruling appeared to be a significant victory for BP, perhaps wounding the state’s quest to collect $1 billion or more in damages, and the motion for reconsideration seems to confirm it.
While state lawyers were pleased Michalski allowed a negligence claim for harm to state land from spilled oil, the judge didn’t make “any provision for the much larger economic damages that were also proximately caused by the same negligent conduct on BPXA’s part,” the state’s motion says.
The state lawyers argue Michalski’s ruling “is not supported by Alaska law,” adding that he “appears to have misperceived” the nature of the state’s negligence claims.
BP is more than just a leaseholder, they argue.
“It is BPXA’s negligence in its role as operator, not merely as one of several lessees on particular leases in the PBU (Prudhoe Bay unit), that forms the basis of the State’s negligence claims,” the state lawyers argue.
BP’s failure in its duty to act as a reasonably prudent operator “resulted in a number of adverse consequences, both to the State’s land that was oiled by the spills and to the State’s economic well-being, and the State is entitled to recover all damages … caused by BPXA’s negligence,” the state’s reconsideration motion says.
The state’s lawyers note that BP Alaska already admitted negligence in maintaining Prudhoe pipelines when it pled guilty in late 2007 to a federal pollution misdemeanor, drawing three years of probation and $20 million in penalties.
The TAPS case Capping a nearly six-week nonjury trial, Judge Gleason issued a 170-page ruling that put the value of the trans-Alaska pipeline system, or TAPS, at $9.98 billion for property tax purposes for 2006. That’s more than double the value state officials determined, and far beyond the $850 million the pipeline owners asserted.
A Department of Revenue official has said Gleason’s ruling, if it withstands appeals, could allow the state to collect an estimated $113 million in extra taxes. The state and several municipal governments would split the revenue.
Five companies own the 800-mile pipeline system: BP, ExxonMobil, ConocoPhillips, Chevron and Koch Industries.
On June 23, the owners filed a motion asking the judge to reconsider and revise various parts of her ruling.
The dense, 23-page motion challenges myriad aspects of the judge’s ruling, arguing Gleason made numerous errors; incorrectly ignored or failed to understand some expert witnesses while giving too much weight to others; and made findings that “misapply and misconceive a fundamental principle of valuation concerning the determination of depreciation in connection with the appraisal of TAPS.”
The pipeline owners are contesting not only their 2006 tax bills, but the state’s assessments for each year since.
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