State mulls civil suit against BP

Alaska building case to seek damages in Prudhoe Bay oil spills

Posted: Thursday, December 06, 2007

ANCHORAGE - BP recently agreed to pay millions in federal criminal fines over an oil spill last year in the nation's largest oil field, but legal wrangling over its past management practices at Prudhoe Bay continues, according to state officials Wednesday.

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Alaska, which relies almost exclusively on oil revenue, is building a case to pursue financial and environmental damages in a civil suit related to both of the spills at Prudhoe Bay in 2006, according to documents from the state Department of Law.

"Our investigation is continuing," said Steven Mulder, Chief Assistant Attorney General of the department's environmental section.

The 201,000-gallon crude spill in March 2006 and a smaller spill five months later ultimately caused BP to halve production at Prudhoe Bay for several weeks starting in August 2006. Roughly 85 percent of the state's general fund comes directly from oil company income taxes.

Both leaks were traced to the failure of BP Exploration Alaska Inc., a subsidiary of London-based BP, to regularly clean and inspect two of its pipelines over the course of several years.

The state is considering a civil lawsuit over "liability to the state resulting in lost revenues" and "damages for discharging petroleum on state land," according to the law department documents posted online. Mulder did not say when a lawsuit would be filed.

BP recently agreed with federal prosecutors to pay $12 million in fines for the first spill in March 2006, which was the largest ever on Alaska's oil-rich North Slope.

Under the agreement, the company also paid $4 million in restitution to the state of Alaska and $4 million to the National Fish and Wildlife Foundation for Arctic environmental research.

The Justice Department and Alaska agreed not to bring further criminal charges against BP Exploration in connection with the spills, but left room for civil claims.

The state has retained Anchorage law firm K&L Gates to help it sort through a copious number of documents subpoenaed from BP and its production partners at Prudhoe Bay, the largest being Texas-based oil companies Exxon Mobil Corp. and ConocoPhillips.

"The state's investigation is ongoing and I don't wish to comment," said K&L Gates attorney Louisiana Cutler.

Following the production cut in August 2006, state attorneys issued subpoenas to Jim Bowles, president of ConocoPhillips, Alaska Inc., Richard Owen, former Alaska operations manager of ExxonMobil Alaska Production, Inc. and Steve Marshall, former president of BP Exploration Alaska, Inc. The Alaska heads of Chevron Corp. and the former Forest Oil Corp. also received subpoenas.

BP spokesman Steve Rinehart said he was not in the position to discuss ongoing or pending cases.

"We don't discuss ongoing litigation," Rinehart said.

He confirmed that the payments in the federal settlement have been made.

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