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Vol. 14, No. 31 Week of August 02, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

BP raps EPA in lawsuit

Company denies government claims in case seeking big fines for Prudhoe spills

Wesley Loy

For Petroleum News

A lawyer for BP Exploration (Alaska) Inc. is faulting pollution regulators in arguing for dismissal of a federal lawsuit brought against the company for high-profile pipeline spills in the Prudhoe Bay oil field in 2006.

Jeff Feldman, an Anchorage attorney defending BP in the civil case, argues the U.S. Environmental Protection Agency broke a promise to supply “detailed written findings” about any deficiencies in the company’s spill prevention, control and countermeasure plans.

Part of the government’s lawsuit accuses BP of failing to prepare and implement adequate SPCC plans for the Prudhoe Bay, Milne Point and Badami fields.

“BPXA admits that, at least at one time, portions of its plan(s) may not have complied” with federal regulations, Feldman wrote in a July 27 answer to the government suit.

He then points a finger at the EPA, saying the agency sprang new information on BP with its court complaint.

“The EPA inspected BPXA’s SPCC plans close to two years ago and, since that time, has promised to provide BPXA with detailed written findings which, among other things, would provide sufficient detail for BPXA to investigate and correct any perceived deficiencies,” Feldman wrote. “Despite these assurances, the EPA has failed to provide any findings and this complaint is the first written notice of any supposed deficiencies with BPXA’s SPCC plans.”

Two lawsuits

The 23-page answer is BP’s opening response to the suit the Department of Justice, on behalf of the EPA and federal pipeline regulators, filed against the company on March 31 in U.S. District Court in Anchorage.

Seattle-based EPA spokesman Mark MacIntyre said the agency, on advice from the Justice Department, declined to comment on BP’s assertions about the SPCC inspection.

The federal suit was one of two government cases filed on the same day against BP over the 2006 spills at Prudhoe.

The State of Alaska filed the other suit, which is aimed at collecting fines as well as lost tax revenue resulting from oil production slowdowns caused by the leaks and subsequent pipeline repairs.

The federal suit seeks millions of dollars in fines and accuses BP of an array of water and air pollution violations, as well as failure to heed terms of a corrective action order from pipeline regulators with the U.S. Department of Transportation.

The two civil suits represent continuing fallout for BP stemming from a 212,252-gallon (5,054-barrel) oil spill — the largest oil spill ever on the North Slope — in March of 2006, and a much smaller spill the following August.

The second spill forced a partial Prudhoe shutdown, rattling world oil markets and stoking congressional and regulatory criticism of BP’s poor upkeep of major pipelines infested with corrosion. The leaky lines funneled sales-grade crude oil into the trans-Alaska oil pipeline.

Feldman, the Anchorage attorney, stood with a BP executive in an Anchorage courtroom on Nov. 29, 2007, for entry of a guilty plea to a single misdemeanor count of violating the Clean Water Act. Prosecutors said BP neglected the pipes to save on expenses.

A judge, saying BP needed to place “a little less emphasis on profit,” sentenced BP to three years on probation and ordered it to pay $20 million in penalties. The sentencing wrapped up the criminal aspect of the 2006 spills for both the federal and state governments.

Now BP is defending against the two civil suits.

BP operates the Prudhoe Bay oil field on behalf of itself and other owners ConocoPhillips, ExxonMobil and Chevron.

Government’s claims

The federal suit seeks potentially tens of millions of dollars in fines against BP, plus court orders for BP to prevent further spills and to obey pipeline regulators.

The suit asserts claims in four general areas:

• Violations of the Clean Water Act for the two spills onto the tundra beneath the leaky pipelines. The suit seeks civil penalties of at least $130,000 per discharge and, to the extent that the spills resulted from “gross negligence or willful misconduct,” fines of up to $4,300 per barrel of oil.

• Failure to prepare and implement the SPCC plans for Prudhoe, Milne Point and Badami. The suit says the EPA in September of 2007 did conduct an inspection and found BP’s SPCC plans lacking. The suit lists eight specific shortcomings in the Prudhoe plan such as failure to “construct all bulk storage tank installations with adequate secondary containment,” and failure to “properly design pipe supports to minimize abrasion and corrosion at all locations.”

• Failure to comply with a corrective action order from the DOT’s Pipeline and Hazardous Materials Safety Administration. The suit says BP violated numerous deadlines for cleaning and internally inspecting certain pipelines.

• Violations of the Clean Air Act for improperly removing asbestos-containing material from more than 260 linear feet of Prudhoe pipelines. BP had hired contract workers to strip insulation off the lines to make way for corrosion inspection, but a resin sealant beneath the insulation was laced with asbestos, a fibrous mineral that can cause lung disease or cancer if inhaled. The suit says BP, among other violations, failed to look for the asbestos before the work began, and failed to adequately wet the asbestos-containing material the workers were stripping from the pipes. The suit seeks a fine of up to $32,500 per day for each violation.

BP’s denials

In its answer to the federal suit, BP offers a near blanket denial of many of the government’s claims, such as the specific allegations on the asbestos matter.

Attorney Feldman wrote that BP admits it is liable for a civil penalty of up to $1,100 per barrel of oil spilled in the major leak of March 2006, but the company denies gross negligence or willful misconduct, which could kick up the fines to $4,300 per barrel.

As for the DOT’s corrective action order, Feldman wrote: “BPXA’s delay in meeting certain deadlines is excused by the doctrines of duress and impossibility.”

The order and subsequent amendments, he wrote, were issued “without a proper notice and hearing, are filled with factual errors, required tasks that were impossible to complete within the timeframes set out in the Corrective Action Order and were overbroad.”

Feldman added: “Among other things, the design of the subject pipelines made compliance with the Corrective Action Order practically impossible, the subject pipelines were the subject of … Department of Justice and State of Alaska preservation orders that prevented strict compliance with the Corrective Action Order, and the discovery of potential asbestos-containing material in the pipelines made strict compliance with the Corrective Action Order impossible.”

When, or if, the case will go to trial is unclear. However, the two sides apparently were trying to negotiate a settlement prior to the government suing BP.

“BPXA is … engaged in discussions with the DOJ, the EPA and the U.S. Department of Transportation concerning a civil enforcement action relating to the 2006 Prudhoe Bay oil transit line incidents,” BP said in a March filing with the U.S. Securities and Exchange Commission.

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