Anchorage Daily News

JUNEAU -- The state is planning to sue BP over "several hundred million dollars" in oil taxes and royalties lost because of pipeline leaks and shutdowns in the giant Prudhoe Bay field, state lawyers have told lawmakers.

The problems that erupted during 2006 in Prudhoe, the nation's largest oil field, rocked world oil markets and led to intense congressional and legal scrutiny for BP, which runs the North Slope field on behalf of itself and other owner companies.

In November, after BP's Alaska subsidiary pleaded guilty to a misdemeanor environmental crime, a federal judge sentenced the firm to three years probation and ordered it to pay $20 million in criminal penalties for a 201,000-gallon oil spill from a corroded pipeline. The sentencing wrapped up the criminal aspect of the case for both the federal and state governments.

At the time the plea agreement with BP was reached, state Attorney General Talis Colberg declined to provide details of the state's civil pursuit of BP.

But the state's strategy was disclosed this week to Alaska legislators hammering out next year's state operating budget.

Rep. Bill Stoltze, R-Chugiak, offered an amendment Wednesday to add $4.7 million to fund preparations for a suit against BP. Members of the House Finance Committee approved the amendment without objection.

The money will go for outside lawyers, experts and the management of huge amounts of data in a complex case that could last "three to four years at least," and more funding requests are expected, according to a memo accompanying the amendment.

State lawyers aim to file suit as soon as September, saying a settlement with the company looks unlikely, the memo says.

The state wants compensation for the "several hundred million dollars" of oil tax and royalty revenue that should have flowed into state coffers during 2006 as well as 2007, the memo says.

Because of corrosion-caused pipeline leaks, BP was forced to partially shut down Prudhoe in 2006, including a stretch of several weeks that fall when about 200,000 barrels of crude oil per day or about half the field's normal output was halted.

BP's "failings" in not properly maintaining its pipelines reduced production by millions of barrels of oil in 2006 and the following year, state lawyers say.

Lawmakers also were told that BP, though hit with subpoenas for millions of pages of documents, still hasn't provided some documents "important to evaluation of the state's losses," the memo says.

State lawyers plan to seek not only the state's revenue losses, but civil penalties and damages for violation of state environmental laws, according to the budget memo.

"We have cooperated -- and are cooperating -- with the state's investigation," said Steve Rinehart, BP's Anchorage spokesman. "I can't comment further since it looks like they plan to sue us."

Supporting the $4.7 million budget request was easy because it's a small amount compared to what the state could win in a settlement or at trial, said Stoltze, who heads a subcommittee overseeing the state's Law Department budget.

"We have a pretty good track record when we supply money to the Department of Law for litigation," he said. "The state doesn't lose a lot of cases."

Steve Mulder, a state assistant attorney general involved in the BP matter, said Thursday he couldn't elaborate further on the funding request or the state's plans.

London-based BP runs Prudhoe Bay and shares costs with other owners including Conoco Phillips, Exxon Mobil and Chevron.

Find Wesley Loy online at adn.com/contact/wloy or call him in Juneau at 1-907-586-1531.

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