May 4, 2011 in Business

BP will pay $25 million for pipeline spill

Dan Joling Associated Press
 

ANCHORAGE, Alaska – BP’s subsidiary in Alaska will pay a $25 million civil penalty under a settlement announced Tuesday that comes five years after more than 200,000 gallons of crude oil spilled from company pipelines on the North Slope.

The penalty is the most ever levied per barrel by national regulators, and U.S. Attorney for Alaska Karen Loeffler said it underlines the seriousness of BP’s conduct.

The settlement also calls for BP Exploration Alaska Inc. to install a system-wide pipeline integrity management program.

“This penalty should serve as a wake-up call to all pipeline operators that they will be held accountable for the safety of their operations and their compliance with the Clean Water Act, the Clean Air Act and the pipeline safety laws,” Assistant U.S. Attorney Ignacia S. Moreno said in a conference call with reporters.

Loeffler told the Associated Press from her office in Anchorage that BP Alaska admitted that it cut corners and failed to do what was required to adequately maintain its pipelines.

BP Alaska spokesman Steve Rinehart in a short email acknowledged the settlement terms, including an independent contractor to monitor operations at the vast Prudhoe Bay field.

A 2006 leak in a transit line, also called a feeder line, between a gathering center and a pump station for the trans-Alaska oil pipeline in March accounted for most of the oil spilled, about 212,000 gallons.

BP in August 2006 had begun inspecting pipelines with “smart pigs,” devices inserted to detect abnormalities, when a second leak occurred. The tiny second leak allowed about 1,000 gallons more to spill from another transit line.

With data in hand indicating 16 “anomalies,” or other possible corrosive spots, BP shut down part of the massive Prudhoe Bay field.

Cynthia Quarterman, administrator for the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, said BP had a year to address problems, but its willful failure to comply led to filing civil litigation against the company.

The settlement requires BP Alaska to develop a program to manage pipeline integrity for the company’s 1,600 miles of pipeline on the North Slope based on PHMSA’s integrity management program. That cost is estimated at $60 million on top of approximately $200 million BP Alaska has spent already replacing feeder lines.

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