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ANCHORAGE - An oil field review starting with a state inspector questioning the size of spill containment facilities on Alaska's North Slope has resulted in a hefty civil payment for a subsidiary of BP PLC.
BP Exploration (Alaska) Inc. has paid the state more than $1.7 million for operating storage tanks and truck-loading facilities without large enough secondary spill containment, the earthworks and layers of impermeable material that keep spilled crude or refined oil from seeping into the ground.
"Secondary containment is a key line of defense," said Larry Hartig, commissioner of the Alaska Department of Environmental Conservation. "In the event of a spill, the enclosed space can stop oil from reaching the tundra."
Two settlements - one for BP's Prudhoe Bay field and another for the smaller Endicott and Badami fields - were signed last month and the penalty has been paid, said Breck Tostevin, a senior assistant attorney general.
The settlement is not connected to BP's 200,000-gallon spill in March 2006, for which BP America paid $20 million and pleaded guilty to a misdemeanor violation of the federal Clean Water Act.
It's also not part of lawsuits the state and federal governments filed against BP in March. The state lawsuit seeks fines and punitive damages plus back taxes for pipeline repairs and a production shortfall of at least 35 million barrels of oil caused by two spills in 2006; the federal lawsuit seeks penalties and corrective action from BP.
BP spokesman Steve Rinehart said proper secondary containment areas are important precautions, and the company has addressed most of the deficiencies covered by the compliance order. Three remaining areas will be addressed by September 2010 under a schedule negotiated with the state, he said.
By state law, major oil facilities must be within a containment area designed to capture oil if there's a spill.
"It's supposed to be large enough to contain the volume of the largest tank plus room for some precipitation, the idea being that if the tank has a catastrophic failure or the piping breaks, the oil leaks out, it contains the volume of the largest tank," Tostevin said.
An inspector, Gary Evans, in October 2007 "eyeballed" a truck loading area and questioned whether the containment area was large enough to contain a tanker spill, said DEC program manager Betty Schorr. He ordered an exercise, filling the area with water, to see if it would hold what BP said it would hold.
"Sometimes you might do something like that if you're concerned about it being sufficiently impermeable, if it might be leaking," Schorr said. "In this case, he just felt like it was undersized and he wanted something done about it."
With conditions icy that late in the year, Schorr said, BP suggested that the company instead survey its containment facilities. Initial inspections revealed three secondary containment areas at Prudhoe Bay failed to meet size requirements and the survey identified 16 other sites. Some were built too small and other has lost useable space due to poor maintenance.
The survey revealed inadequate containment facilities at both truck loading facilities and at large tanks that held diesel fuel and oil pumped out of the ground.
"Some of them were significantly undersized," Schorr said.
Most of the problems were at Prudhoe Bay, Tostevin said. BP has repaired most of the facilities and the rest will be done next year.
The process for calculating the settlement is set out in law and includes reimbursing the state for inspection and legal costs. Another factor, Tostevin said, is the savings the company enjoyed by not complying with the law.
"We took the cost of what it cost to fix them and figure kind of the time value of not having complied earlier," Tostevin said.
BP Exploration (Alaska) Inc. is a subsidiary of London-based BP PLC, Europe's second largest oil company.