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Wrangling continues in Alaska vs. BP State wins pretrial ruling on ‘negligence’ claims stemming from 2006 Prudhoe pipeline leaks; high-stakes trial set for March 2012 By Wesley Loy For Petroleum News
Fierce legal skirmishing continues in the buildup to a potential high-stakes trial pitting BP and the state, which is suing the oil giant for damages in connection with oil pipeline leaks in Alaska’s Prudhoe Bay field in 2006.
Already, BP has won a major pretrial victory with a judge’s December tossing of the state’s claims for back taxes on oil production shortfalls associated with the leaks and ensuing pipeline replacements.
Now Superior Court Judge Peter Michalski of Anchorage has handed a favorable ruling to the state.
In a nine-page order issued June 8, the judge granted the state partial summary judgment on two of the 10 counts in the state’s civil suit. These counts have to do with the state’s contention that BP was negligent in its efforts to prevent corrosion in its Prudhoe pipeline network.
As part of the ruling, the judge held that BP is prohibited, under a legal doctrine known as estoppel, from contradicting past admissions of negligence.
BP ‘backtracking’ alleged The pretrial wrangling is important because it defines exactly what will be contested in the trial now scheduled for March 2012.
The state sued BP Exploration (Alaska) Inc. on March 31, 2009, over the Prudhoe spills.
The biggest of the spills, discovered in March 2006 along an oil transit line in the field’s western operating area, amounted to 212,252 gallons of sales-grade crude. It was the largest oil spill ever on the North Slope, but significant damage to the tundra was not widespread.
A second, much smaller spill occurred in August 2006 along a different oil transit line in Prudhoe’s eastern operating area. That spill triggered a high-profile partial field shutdown.
In late 2007, BPXA pleaded guilty to a single misdemeanor violation of the Clean Water Act in connection with the larger spill only. A federal judge sentenced BP to three years probation and ordered it to pay penalties totaling $20 million. The penalties included $4 million in criminal restitution to the state, which agreed not to pursue its own criminal charges against the company.
On Jan. 26, lawyers for the state filed a motion for partial summary judgment on the negligence claims in its civil suit against BPXA. And they asked the judge to stop the company from denying admissions it previously made in the criminal proceedings.
In a plea agreement, BPXA admitted it “acted negligently” by failing to adequately inspect and clean the oil transit lines, and it admitted failing to take necessary action to prevent the leaks.
Since then, in defending the state’s civil suit, BPXA has attempted to “backtrack on these admissions,” the state’s Jan. 26 motion said. The company instead has asserted its comprehensive corrosion management program met or exceeded industry practices, and that problems occurred despite these reasonable efforts.
One pipe, one hole, one leak On March 7, lawyers for BPXA filed papers opposing the state’s motion.
The lawyers argued that, yes, BPXA was negligent, but that it isn’t prepared to concede the broad, systemic negligence the state is seeking to establish to support its civil claims.
The misdemeanor Clean Water Act conviction concerned a leak from an almond-sized hole in a segment of an oil transit line at a low place — a caribou crossing — in Prudhoe’s western operating area, the opposition papers said.
The state’s civil suit throws its lasso wider, covering not only the western operating area but the eastern operating area as well.
The company lawyers argued BPXA’s statements haven’t been contradictory.
“BPXA will take the same fundamental position in the civil trial as it took in the criminal case,” the opposition papers said. “In the criminal case BPXA admitted negligence with respect to the maintenance of one spot in one line leading to one leak.”
Further, the papers said, BPXA stressed at its 2007 sentencing hearing that the leak was “an anomaly,” out of character with the company’s “three-decade history of successful corrosion management on the North Slope.”
In the end, Judge Michalski ruled for the state, finding that statements in the plea agreement “rise to the level of admitting negligence with respect to BPXA’s corrosion monitoring and control practices” on the oil transit lines in both the western and eastern operating areas.
BP’s witness list The state is seeking damages that, if it prevails, could total hundreds of millions of dollars.
Among claims still in play in the suit are “lost” royalties on what the state contends was a production shortfall of at least 35 million barrels of oil and natural gas liquids resulting from the leaks and replacement of corroded pipelines.
The case, if it goes to trial, could showcase armies of expert witnesses for both sides.
BPXA has filed a list of some 140 potential witnesses from around the world.
Among familiar names on the list:
• Richard Woollam, BPXA’s former corrosion manager, who invoked the Fifth Amendment in refusing to answer questions during a congressional hearing on the Prudhoe leaks.
• Steve Marshall and Doug Suttles, former BPXA presidents.
• Bob Malone, former BP America president.
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