|
State, BP suffer setbacks in spill case The two sides are jousting in preparation for 2012 trial of billion-dollar civil suit over spills in Alaska’s Prudhoe Bay field Wesley Loy For Petroleum News
An Alaska judge has dealt setbacks to both the state and BP in a high-stakes civil case concerning the Prudhoe Bay pipeline spills of 2006.
The state is suing local subsidiary BP Exploration (Alaska) Inc. for a range of damages including back taxes and royalties on production shortfalls experienced because of leaks and subsequent pipeline replacements. The state contends at least 35 million barrels of oil and natural gas liquids production from the Prudhoe Bay field and the neighboring Milne Point field was lost from 2006 through 2008. BPXA operates both fields.
The state says BPXA was negligent in failing to safeguard the pipes against corrosion, and might be liable for $1 billion or more in damages.
In preparing the case for trial, the two sides are going through the normal process of discovery in which they exchange documents and other information.
But disputes have arisen during discovery. One pertains to the state’s request for the industry’s “facility sharing agreements” on the North Slope. Another concerns the state’s request for documents from BPXA’s parent companies, London-based BP PLC and BP America Inc.
Facility sharing agreements In November 2009, the state served BPXA with discovery requests for “all documents relating to facility sharing agreements” back to 1990.
Under facility sharing agreements, the owners of an oil processing facility accommodate production from adjacent or satellite fields, meaning a facility owner might need to defer some of its own production at times.
How adjacent field lessees compensate the facility owner for this is of great interest to the state’s lawyers, who argued the requested documents “are evidence of the method employed by BPXA and other North Slope producers to determine the present-day value of lost or deferred oil production, and therefore are relevant to the State’s calculation of its damages in this case.”
The state wanted to see facility sharing agreements from across the North Slope, but BPXA was opposed, arguing in part that the agreements are confidential.
A court-appointed official known as a discovery master ruled the state was entitled to facility sharing documents, but only those for the Prudhoe Bay and Milne Point units.
The state appealed the discovery master’s ruling to Superior Court Judge Peter Michalski, who is presiding over the civil suit. On Nov. 23, he denied the state’s appeal.
“The Discovery Master carefully weighed the likely relevance of the Facility Sharing Agreements with their confidentiality and determined that only the Facility Sharing Agreements related to Prudhoe Bay and Milne Point production facilities are subject to discovery,” Michalski wrote in a brief order. “The Court affirms that decision.”
Parent company records The state also asked BPXA to produce documents from its parent companies.
The requested documents relate to management of the Prudhoe Bay and Milne Point units and the financial impact of the spills and production shut-ins.
The discovery master ordered BPXA to turn over the documents to the state.
BPXA appealed that decision to Michalski, arguing in part that BPXA employees have no access to the documents stored on restricted servers in London.
“Not only can employees of BPXA not access the servers from BPXA’s offices in Alaska, even if BPXA employees travel to London they are unable to access the servers,” a BPXA executive, Claire Fitzpatrick, said in an affidavit filed with the court.
Michalski ruled against BPXA on Nov. 23. The discovery master found the company has the “practical ability” to obtain the requested documents, Michalski said, adding the Fitzpatrick affidavit had not persuaded him or the discovery master otherwise.
“BPXA is hereby ordered to respond to the discovery requests in a prompt and efficient manner,” Michalski’s order said.
A trial of the case is scheduled to start March 19, 2012.
| 