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Alaska to collect ${esc.dollar}255 mln for 2006 BP pipeline leaks

Source: Thomson Reuters Foundation - Fri, 9 Nov 2012 03:23 GMT
Author: Reuters
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* Probe shows BP failed to adequately maintain pipelines

* Feds blame cost-cutting mentality for incidents

* Ruling ends state's litigation against spills

By Yereth Rosen

ANCHORAGE, Alaska, Nov 8 (Reuters) - The U.S. state of Alaska will collect ${esc.dollar}255 million related to BP Plc's pipeline leaks and a resulting shutdown in 2006 in the Prudhoe Bay oilfield, drawing a line under an accident that contributed to the British company's U.S. troubles.

BP's share is ${esc.dollar}66 million since it will pay the award and then be reimbursed by partners, including Exxon Mobil Corp and ConocoPhillips, based on their proportionate share of ownership, BP spokeswoman Dawn Patience said.

The payment, which is final and not subject to appeal, includes a ${esc.dollar}245 million award from a panel of three arbitrators and ${esc.dollar}10 million to settle civil assessments for the spills, the state's Department of Law said on Thursday.

Also on Thursday, BP and lawyers for people and businesses claiming damages from the 2010 Gulf of Mexico oil spill urged a U.S. judge to approve a proposed ${esc.dollar}7.8 billion class-action settlement. BP still faces civil and potential criminal liability charges over that spill.

Corroded oil transit pipelines led to the Prudhoe Bay spills in March and August of 2006 and the partial shutdown of the field that year. A federal investigation concluded BP failed to adequately maintain the pipelines and blamed a cost-cutting mentality at the company for the incidents.

The arbitration panel concluded that the pipeline problems and associated reservoir complications resulted in lost or deferred production of more than 30 million barrels of oil and natural-gas liquids until the end of the oilfield's life.

The ${esc.dollar}245 million payment, due Dec. 3, is for lost state royalties and interest, said Breck Tostevin, senior assistant Alaska attorney general. The ${esc.dollar}10 million, due Nov. 15, comprises per-gallon environmental penalties for the spills, fines for natural resource damages and other civil charges, he said.

The spill of March 2006, which went undetected for days, was the North Slope's biggest oil spill on record. About 213,000 gallons leaked out of a corroded hole in the pipeline, according to state and federal environmental officials.

The August spill was much smaller, but it triggered months of production shut-ins to allow for cleanup, repairs and replacement of the Prudhoe Bay transit-line system.

The state originally sought several hundreds of millions of dollars in compensation for lost oil revenue. A state Superior Court judge in late 2010 dismissed the state's claims for lost oil-tax revenue but left the royalty claims intact.

BP argued that no money was owed to the state for lost production, state officials said, but the case went to arbitration last December.

Tostevin said the arbitrators' ruling ends the state's litigation against BP for the 2006 spills and production upsets.

"This resolves the state's civil claims," he said.

In 2007, BP pleaded guilty to a misdemeanor environmental crime and paid ${esc.dollar}20 million in fines to settle all federal and state criminal investigations into the corrosion problems.

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