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BP still fighting fines stemming from '06 oil spills at Prudhoe Bay

Jill Burke

While there may be a glimmer of success in BP's effort to contain the massive undersea oil spill in the Gulf of Mexico, the company is still cleaning up a mess left over from corroded pipes that spilled oil in 2006 at Alaska's Prudhoe Bay, the nation's largest oil field.

Compared to the Gulf, the Alaska spills -- in March and August 2006 --were far smaller, occurred on land and were contained within days. Corroded pipelines have since been replaced, but three years later the consequences of the spills linger, spreading from northern Alaska to the halls of justice hundreds of miles away in Anchorage.

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In fall 2007, BP pleaded guilty to violating the Clean Water Act and was hit with a $20 million fine and agreed to be placed on three years probation, with an option for early release if it demonstrated significant progress making improvements to its problem pipes and oversight programs. More than a year and half later, in March 2009, the feds went a step further and the Justice Department, acting on behalf of the Environmental Protection Agency, sued BP for a string of violations in connection with the spills.

At stake for BP are tens of millions of dollars in alleged federal violations -- fines sought in addition to those BP already agreed to pay in resolving its criminal case. The month before BP's guilty plea, an EPA investigation uncovered numerous problems with BP's operational practices at Prudhoe Bay, according to the Justice Department's complaint filed in Anchorage's federal court. In addition to leaking oil into the environment, the company failed to implement an acceptable spill-prevention and control plan and was delinquent in repairing pipelines it was under federal orders to fix, according to court filings.

BP, which has eight months left on its three-year term of federal probation for the Alaska spills, admits it's on the hook for what could amount to about $5.5 million for the March 2006 spill, the result of a corroded pipeline that leaked more than 212,000 gallons of oil onto the frozen tundra, with a sheen discovered afterward on a nearby lake. And the company admits some of its spill- and prevention-control measures were, at times, not up to par. But that's where its agreement with Justice Department claims ends.

BP denies the 2006 spills polluted wetlands, shorelines, rivers or the Beaufort Sea. It also denies it mishandled asbestos, a federally regulated substance, during work to prepare the pipeline for inspection. And it denies dozens of allegations that it violated a handful of other federal regulations.

BP's denials, if successful, stand to substantially reduce the maximum proposed fines cited in court records.

If every allegation in the complaint sticks at trial, BP could easily be liable for more than $30 million in fines: $22 million for the spills if a judge finds the company was "grossly negligent," at least $750,000 for numerous violations of the Clean Air and Water Acts, and as much as $7 million more for a slow response to federally-ordered pipeline fixes.

According to the Justice Department, BP, after already receiving permission for several delays, failed to implement weekly cleanings and internal inspections of various pipeline segments prone to corrosion by 15 to 149 days beyond the order's deadline. In total, the complaint lists 635 days when BP was out of compliance with the order. For dragging its feet in complying with repair orders BP could be slapped with up to $100,000 per violation per day in penalties, per an April 2007 compliance order sent to BP from the U.S. Pipeline Safety Office.

A BP spokesman declined to comment on the case but said operations at Prudhoe Bay have improved since 2006.

"We have taken significant steps to ensure that our operations are safe and reliable and protect the environment. Those include building a new $500 million system of oil transit lines at Prudhoe Bay," said Steve Rinehart, a BP spokesman in Alaska.

Still, that doesn't appear to have been enough to satisfy the government. More than four years after the first spill, a federal corrective action order against BP remains classified as "open," according to online files for the U.S. Transportation Department's Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety, which regulates oil transit lines like those that leaked in 2006. And as of March 2009, BP remained subject to the order, according to the Justice Department's complaint.

The company also remains on probation stemming from its fall 2007 guilty plea, which indicates it hasn't successfully completed other planned remedies in response to the spills and the subsequent legal actions. Per an agreement with the court, had the company made significant progress replacing its oil transit lines, implementing and operating and integrity management plan and improving its leak-detection system, it could have ended its federal probation up to two years early.

In its defense, BP argues the design of the pipelines made compliance with the Pipeline Safety Office's compliance order "practically impossible." It claims "preservation orders" for the pipelines from the Justice Department and state of Alaska also prevented strict compliance with the Pipeline Safety Office's demands. It also alleges that the EPA is itself in violation of the law -- failing to provide BP with its investigative findings or to hold hearings concerning perceived problems with its spill prevention and control plans. BP also claims the EPA's regulations covering spill response plans are unconstitutionally vague.

The EPA refused to answer questions about its handling of BP's case, citing a blanket policy against discussing pending litigation.

The Justice Department and BP have sat down at least four times face-to-face to try to reach a settlement, and have told the court they want to keep working toward that end. On April 30, 10 days after the Deepwater Horizon deep-sea drilling rig erupted in flames and a well owned by BP in the Gulf of Mexico began spewing oil, both sides asked to push back upcoming witness and discovery deadlines. They want a three-month delay in order to continue their settlement negotiations.

Contact Jill Burke at jill(at)alaskadispatch.com.