Justice, BP continue settlement talks

Wesley Loy

For Petroleum News

The government and BP appear closer than ever to settling a federal lawsuit over the 2006 pipeline spills in Alaska’s Prudhoe Bay oil field.

In a joint motion filed Oct. 11 in U.S. District Court in Anchorage, Justice Department and BP lawyers asked for a three-month extension of certain deadlines for preparing the case for a possible trial.

It’s the second such request the two sides have filed. A judge granted an initial extension in May after lawyers said they wanted to concentrate on settlement talks.

“Since that time, the parties have diligently continued settlement discussions, including in-person meetings with full client participation and the exchange of penalty offers and drafts of potential consent decrees,” the Oct. 11 motion said. “Because of the varied and complex matters at issue in this case and because of the many agencies and companies affected by any settlement, settlement discussions have taken longer than the parties first anticipated.”

The lawyers noted, however, they would carry on with exchanging documents as part of the legal process known as discovery “so that, should settlement talks fail, the parties can easily turn their focus to preparing their respective cases for trial.”

The government and BP together have produced more than 105,000 documents totaling more than 1.3 million pages, the motion said.

U.S. District Judge John Sedwick granted the motion on Oct. 13, giving the two sides until Jan. 28, 2011, for expert witness disclosures and April 1, 2011, to complete discovery.

BP is defending two civil lawsuits stemming from the 2006 pipeline spills — the federal suit and a suit the state filed. The state case is pending in Superior Court in Anchorage.

The Justice Department on March 31, 2009, sued BP Exploration (Alaska) Inc. on behalf of the Environmental Protection Agency and federal pipeline regulators.

The 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.

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

The suit was fallout from a 212,252-gallon oil spill — the largest ever on Alaska’s North Slope — in March 2006, and a much smaller spill the following August.

The second spill forced a partial shutdown of the BP-operated Prudhoe Bay field, rattling world oil markets and drawing congressional and regulatory criticism of BP’s upkeep of corroded transit lines that carry sales-grade crude to the trans-Alaska oil pipeline.

BP Alaska in late 2007 was sentenced to three years probation and ordered to pay $20 million in penalties after the company pleaded guilty to a federal environmental misdemeanor.

The state’s lawsuit alleges negligence and seeks not only fines but oil taxes and royalties the state argues were “lost” because of production shut-ins and pipeline replacements following the leaks. State lawyers have said they’re aiming for $1 billion or more in damages.

BP also is involved in a lawsuit company shareholders have brought in Alaska in connection with the Deepwater Horizon disaster, the Prudhoe spills and other pollution and safety-related incidents.