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BP ruled liable for $1.7 million fine Alaska judge clears way for state to seek four times the amount for 212,252-gallon crude oil spill in Prudhoe Bay field in 2006 Wesley Loy For Petroleum News
A state judge has ruled that BP Exploration (Alaska) Inc. is liable for a civil penalty of nearly $1.7 million in connection with a large oil spill in the Prudhoe Bay field.
The ruling marks a modest victory for the state in its lawsuit seeking huge damages for pipeline leaks in 2006, one of which resulted in the 212,252-gallon crude spill, the largest ever seen in Alaska’s North Slope oil fields.
In an eight-page decision signed Feb. 2, state Superior Court Judge Peter Michalski ruled that BP is liable for a $1,698,016 penalty for the spill, which is based on a state statute that specifies a fine of $8 per gallon of spilled oil.
Michalski also ruled that BP is not entitled to a credit of $168,336 for cleaning up 21,042 gallons of oil within 36 hours after discovery of the spill from a corroded pipeline. The judge held the 36-hour period starts running when an oil discharge actually begins. In the Prudhoe spill, the leak was ongoing for about five days before a field worker found it on March 2, 2006, so no credit is due.
‘Enhanced penalty’ possible Michalski further ruled the state is free to pursue an “enhanced penalty” against BP. The state has indicated it will seek to quadruple the fine to $6,792,064 on grounds that BP was grossly negligent and violated its oil spill prevention and contingency plan.
Even the enhanced penalty, however, would be a minor sum in the overall context of the lawsuit, in which the state is seeking hundreds of millions of dollars in “lost” revenue due to production slowdowns resulting from replacement of bad pipelines.
In December, BP scored a major victory when Michalski threw out the state’s claim for back taxes. But that decision did not affect the state’s royalty claim on a production shortfall the suit estimates at 35 million barrels from 2006 through 2008.
All these interim rulings come as the case builds toward a trial, which could begin in March 2012.
Federal suit pending The state lawsuit is one of two civil cases hanging over BP stemming from the 2006 pipeline leaks.
The U.S. Department of Justice also sued BP on behalf of the Environmental Protection Agency and federal pipeline regulators.
The federal suit seeks millions of dollars in penalties for alleged water and air pollution violations, as well as failure to meet deadlines in a corrective action order from the Pipeline and Hazardous Materials Safety Administration.
Justice Department and BP lawyers have said they’re trying to settle the case, recently telling the court they had “diligently pursued settlement discussions, including multiple exchanges of proposals for resolution of the case and drafts of a potential consent decree.”
No settlement talks appear to be under way in the state case, in which the potential damages likely are much greater.
Both civil suits came after criminal prosecution of BP Alaska wrapped up with the company’s 2007 guilty plea to a federal pollution misdemeanor.
Owners in Prudhoe Bay, the nation’s largest oil field, include ExxonMobil, ConocoPhillips, Chevron and operator BP.
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