BP to pay $25 million to resolve 2006 ANS pipeline spill charges

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 3 -- BP Exploration Alaska Inc. agreed to pay a $25 million fine and carry out a system-wide pipeline integrity management program as part of a settlement for spilling more than 5,000 bbl of crude oil from an Alaska North Slope pipeline in 2006, the US Department of Justice, Environmental Protection Agency, and Pipeline & Hazardous Materials Safety Administration jointly announced.

It is the largest federal per barrel penalty so far for an oil spill, the agencies said. PHMSA Administrator Cynthia L. Quarterman said it was a stern reminder to pipeline operators to follow the US Department of Transportation agency’s orders or risk a federal civil lawsuit and steep fines. “Also, it is a warning that operators must know, test, and maintain their pipelines or risk harming people and the environment and having to spend, as in this instance, hundreds of millions of dollars replacing those pipelines,” she said.

BP Alaska spilled 5,054 bbl of crude from an ANS pipeline in March 2006 and another 24 bbl the following August, the agencies said in their May 7 announcement. They said EPA and PHMSA investigators determined that the spill’s resulted from the company’s failure to properly inspect and maintain the pipeline to prevent corrosion.

PHMSA issued a corrective action order to BP Alaska that addressed the pipeline’s risks and ordered repairs or replacement. When it did not fully comply with the order’s terms, PHMSA referred the case to DOJ. The settlement also addresses Clean Air Act violations arising out of BP Alaska’s improper asbestos removal along the pipeline in the spills’ aftermath, the agencies said.

They said the settlement requires BP Alaska to develop a system-wide program to manage pipeline integrity for the company’s 1,600 miles of ANS pipeline based on PHMSA’s integrity management program. The program will address corrosion and other threats to these oil pipelines and require regular inspections and adherence to a risk-based assessment system, according to PHMSA. It will cost an estimated $60 million over 3 years and comes in addition to the nearly $200 million BP Alaska has already spent replacing the lines that leaked on the North Slope, the agency indicated.

Of the $25 million fine, $20.05 million will be deposited in the Oil Spill Liability Trust Fund established under the Clean Water Act. The remaining $4.95 million will be paid to the US Department of Treasury. The funds paid to the Oil Spill Liability Trust Fund will be used to finance federal response activities and provide compensation for damages sustained from future discharges or threatened discharges of oil into water or adjoining shorelines.

BP Alaska pleaded guilty in 2007 to one misdemeanor violation of the Clean Water Act for the March 2006 spill, DOJ said. The company was sentenced to 3 years probation and ordered to pay a $20 million criminal penalty, including a $12 million fine, $4 million to the National Fish and Wildlife Foundation to support research and activities on the North Slope, and $4 million in restitution to the State of Alaska.

The settlement’s consent decree is subject to a 30-day public comment period and final court approval.

Contact Nick Snow at nicks@pennwell.com.

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