US takes BP to court

06 April 2009

The US government has filed a civil complaint against BP Exploration (Alaska), alleging violations of federal clean air and water laws in 2006.
The complaint, filed jointly by the Department of Justice, Environmental Protection Agency and the Department of Transportation, follows a settlement the authorities agreed to in 2007 on criminal charges against the UK oil major.

Trans-Alaska pipeline

The civil lawsuit alleges BP illegally discharged more than 200,000 gallons of crude oil from its pipelines in Prudhoe Bay onto the North Slope of Alaska during two major oil spills in March and August 2006. The latter spill led to a temporary shutdown of operations that led to a spike in oil-prices. Prices for North Slope crude peaked in July of 2008 at $144 a barrel. The two spills and subsequent emergency pipeline replacement work significantly reduced oil production for more than two years.

The complaint also alleges that BP failed to prepare and implement adequate spill-prevention, counter-measure and control plans in accordance with good engineering practices and failed to put in place required spill-prevention measures.

Furthermore, BP is alleged to have improperly removed asbestos-containing materials from its pipelines and failed to comply in a timely manner with government orders to conduct testing, inspection, maintenance and repair activities.

The lawsuit asks the court to order BP to take all appropriate action to prevent future spills, including systematically inspecting its pipelines and associated facilities for corrosion.

The government is also seeking the highest amount of civil penalties possible by law, the Justice Department said. An Alaskan State attorney has said that the lawsuit was seeking as much as $1bn for lost revenues due to production shutdowns following the two spills in 2006, claiming that the state lost revenues on 35m barrels of oil.

However, sources say the state is unlikely to be granted anywhere near this amount in compensation, as the oil was not "lost", it was just not produced

The earlier criminal settlement sought to draw a line under two years of damage to BP’s troubled North American operations, with the oil group agreeing to pay fines totalling $373m to US authorities to settle alleged violations linked to its Texas refinery explosion, Alaska oil pipeline leaks and fraud in energy trading.

The biggest oil spill-related civil penalty in Alaska to date was the $900-million settlement (Dh3,305 million) struck by Exxon Corp, now part of oil giant ExxonMobil Corp and the US and Alaska governments in 1991 for the 1989 Exxon Valdez disaster, the nation's worst tanker spill.