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September 2009

Vol. 14, No. 36 Week of September 06, 2009

State vs. BP penciled in for 2011 trial

Civil suit seeks potential $1 billion in back taxes, damages for 2006 pipeline leaks at Prudhoe Bay; trial could last three months

Wesley Loy

For Petroleum News

Lawyers for the state and BP are proposing a late 2011 trial date for a lawsuit in which the state is seeking potentially $1 billion in back taxes and other collections from the oil company in connection with North Slope oil spills three years ago.

The opposing attorneys jointly specified the trial date as part of a 12-page proposed order filed Aug. 20 that lays out guidelines for managing depositions, expert witnesses, evidence and other aspects of what is expected to be a highly complex case. To take effect, the order needs the signature of state Superior Court Judge Peter Michalski of Anchorage.

The state sued BP’s local subsidiary, BP Exploration (Alaska) Inc., on March 31 seeking to collect damages as well as taxes and royalties the state’s lawyers contend were “lost” due to production shut-ins related to leaks from corroded oil transit lines within Prudhoe Bay, the nation’s largest oil field.

The state’s lawyers accuse BP of knowingly neglecting the pipes and skimping on maintenance such as pigging the pipelines as the company sought to cut costs.

BP’s lawyers argue the tax and royalty revenue was merely “deferred” and not lost, are fighting to have at least some of the state’s case — such as its claim for punitive damages — tossed out of court.

Federal case also pending

In the proposed pretrial order, state and BP lawyers are suggesting the trial begin on Sept. 12, 2011. They estimate that trying the civil case will take about 12 weeks.

The state lawsuit isn’t the only one BP is defending in connection with the 2006 spills.

The federal government brought its own civil suit against BP on the same day as the state did.

Justice Department lawyers filed that suit in U.S. District Court in Anchorage on behalf of the Environmental Protection Agency and Department of Transportation pipeline regulators. The federal suit seeks millions of dollars in fines for alleged water and air pollution violations, as well as failure to meet deadlines in a corrective action order from pipeline regulators.

BP’s lawyers have denied many of the federal claims, and say some of the deadlines in the corrective action order were impossible to meet.

As in the state case, opposing lawyers in the federal suit met recently to hammer out a management plan for the case.

The plan indicates the case would be ready for trial by the end of next year, and that only a judge would hear the case, not a jury. The lawyers estimate a trial would last 20 days.

That’s if the case ever gets to trial. “Settlement negotiations are ongoing,” the case management plan says. The two sides might ask for mediation, and if so, they’ll do it on or before Nov. 1, the court papers say.






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