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May 2010

Vol. 15, No. 22 Week of May 30, 2010

BP hit with shareholder suit in Anchorage

Citing Gulf disaster and environmental and workplace safety incidents in Alaska, plaintiff accuses company board of mismanagement

Wesley Loy

For Petroleum News

An Alaska resident and BP shareholder on May 20 filed a lawsuit against the company’s board of directors alleging “gross mismanagement” leading to “reckless and illegal health, safety and environmental practices.”

The 57-page suit, filed in Alaska Superior Court in Anchorage, focuses mainly on the Deepwater Horizon disaster in the Gulf of Mexico, but also cites BP’s environmental troubles on Alaska’s North Slope, where the company runs giant Prudhoe Bay and other oil fields.

The plaintiff, Jeffrey Pickett, is identified in the suit as “a citizen and resident of Alaska” and a BP shareholder since 2000.

The “shareholder derivative” lawsuit, in which Pickett is suing on behalf of BP and its subsidiaries, names the entire board of London-based BP as defendants, including the company’s chief executive, Tony Hayward. Also named as a defendant is John Minge, president of BP Exploration (Alaska) Inc.

The suit says the Gulf catastrophe “is the most recent notable example of BP’s failure to properly implement safety and environmental protections into its operations.”

Of the defendants, the suit says their “disdain for safety and environmental laws, and the resulting loss of lives and property, has plunged BP into a public relations crisis whereby BP has now been tagged as an unsafe company and gross polluter, all of which are extremely negative developments which are hurting BP’s business.”

Steve Rinehart, BP’s Alaska spokesman, said the company had no comment on the lawsuit.

“We do not typically comment on litigation,” he said in a May 25 e-mail to Petroleum News.

Aside from a long narrative on the events surrounding the deadly April 20 explosion and subsequent sinking of the Transocean semisubmersible rig Deepwater Horizon, which was drilling an exploration well for BP offshore Louisiana, the lawsuit cites certain Alaska events as evidence of the company’s “laissez-faire attitude about safety and the environment.”

The suit recounts the corrosion-related pipeline leaks that hobbled Prudhoe Bay in 2006, causing the largest oil spill ever on the North Slope at more than 200,000 gallons and resulting in BP Exploration’s guilty plea to a federal environmental misdemeanor.

“BP’s Alaska operations … continue to be rife with safety and environmental violations,” the suit asserts, citing a Jan. 14 letter the House Energy and Commerce Committee sent to Minge concerning “recent serious safety and production incidents.”

The incidents included a September 2008 event in which a high-pressure natural gas pipeline ruptured near Prudhoe’s Y pad, hurling pieces of pipe across the tundra, and a January 2009 event in which a massive venting of gas occurred at Pump Station 1 of the trans-Alaska oil pipeline during a troublesome pigging operation on a Prudhoe transit line. Regulators were critical of BP after both incidents.

The lawsuit also contends BP “faces yet another criminal investigation” by the U.S. Environmental Protection Agency and the Alaska Department of Environmental Conservation for a November 2009 pipeline spill near the Lisburne production center.

For BP shareholders, the Gulf disaster appears to have been a heavy blow. On May 24, the company’s shares on the New York Stock Exchange closed at $41.86, down 31 percent since the April 20 rig explosion.

This isn’t the first such shareholder derivative lawsuit to be filed in Anchorage against BP board members and officers. A similar suit was brought in October 2006 following the Prudhoe leaks and the 2005 explosion that killed 15 workers at BP’s Texas City refinery.

That case ultimately was settled with an agreement requiring “certain corporate governance changes at BP designed in part to prevent a recurrence of the disregard of safety and maintenance problems” at the company, the latest suit says.

But BP, the suit continues, “has not experienced any improvement in its workplace and environmental safety” and the board “cannot be trusted to carry out improvements and reforms.”

As relief, the suit asks the court for compensatory and punitive damages; an injunction compelling the board to see to it BP managers don’t violate safety and environmental laws; and appointment of an independent “corporate monitor” responsible for safety and environmental compliance protocols at BP.






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