Environment: BP fined $20 million for 200,000 gallons spill

WASHINGTON, Nov. 29 /PRNewswire-USNewswire/ -- British Petroleum
Exploration (Alaska), Inc., (BPXA) pleaded guilty today in federal court to
a criminal violation of the Clean Water Act for spilling 200,000 gallons of
crude oil from a pipeline onto the tundra and a frozen lake on the North
Slope in March of 2006, announced Ronald J. Tenpas, Acting Assistant
Attorney General for the Justice Department's Environment and Natural
Resources Division and Nelson P. Cohen, U.S. Attorney for the District of
Alaska.

U.S. District Court Judge Ralph R. Beistline accepted the guilty plea
to the one-count information and sentenced BPXA to pay a total of $20
million in criminal penalties, of which $12 million is criminal fine, $4
million is community service payments to the National Fish and Wildlife
Foundation (NFWF) for the purpose of conducting research and activities in
support of the arctic environment in the State of Alaska on the North
Slope, and $4 million is criminal restitution to the State of Alaska. BP
also will serve a three-year term of probation.

At sentencing, Judge Beistline said, "This incident provides us all a
clear warning of the need to be vigilant with regard to pipeline
maintenance and with regard to safety and security of the pipeline and
environmental protection. BPXA needs to make sure the oil flows smoothly
but safely and I think we have to put particular emphasis on the need to
give high priority to maintenance and maybe a little less priority on
profits."

The joint federal and state criminal investigation leading to the plea
agreement involved two different leaks from oil transit lines (OTLs)
operated by BPXA. The leaks occurred in March and August of 2006, and were
the result of BPXA's failure to heed many red flags and warning signs of
imminent internal corrosion that a reasonable operator should have
recognized. The first pipeline leak, discovered on March 2, 2006, by a BP
employee who smelled the leaking crude oil, resulted in more than 200,000
gallons of crude oil spreading over the tundra and a nearby frozen lake.
This was the largest spill ever to occur on the North Slope.

"BPXA failed to heed warning signs that would have avoided the
corrosion that lead to oil spills onto the North Slope," said Acting
Assistant Attorney General Ronald J. Tenpas for the Environment and Natural
Resources Division. "There is no excuse for these spills and today's
sentence is a fair and appropriate penalty. The Justice Department is
committed to strong enforcement of environmental laws."

The second leak occurred in August of 2006, but was quickly discovered
and contained after leaking approximately 1,000 gallons of oil onto the
tundra. Nevertheless, the second leak led to the shut down of Prudhoe Bay
oil production on the eastern side of the field. BPXA shut down production
because it could not guarantee the condition of the line and whether it was
fit for service. By reason of BP's immediate spill response and its
cooperation with the investigation, it was not charged with the second
spill.

During the investigation the United States obtained a section of pipe
where the March 2006 leak occurred. Approximately six inches of sediment
was found on the bottom of the thirty-four-inch-diameter pipe. When
sediment builds up in a pipeline it forms an environment in which acid
producing bacteria can thrive undisturbed by the flow of oil and chemicals
intended to protect the pipe from corrosion. The acid produced by these
bacteria can corrode pits or, if unchecked, holes in the wall of the pipe.
Knowing this, BPXA should have cleaned the OTLs with a piece of equipment
called a maintenance (or cleaning) pig and inspect the pipes for corrosion
with a smart pig, which had not been done for eight years.

A maintenance pig would have disturbed the bacteria and cleared out the
stagnant water and sediment that harbor the acid-producing bacteria. A
smart pig would have provided a clear picture of the corrosion activity
that was occurring in both areas where leaks eventually occurred. BPXA's
leak detection system was dependent upon clean pipe in order to function
optimally. Accordingly, BPXA's failure to keep the pipeline clean led to
product leaking from the pipe and the inability to promptly discover the
leak.

The failure to adequately manage the corrosion in the pipeline that
leaked--in light of the risks known to BPXA--was due to BPXA's failure to
allocate sufficient resources to ensure safe and environmentally protective
operation of the pipelines that leaked. Cost-cutting was the emphasis for
operation of the Greater Prudhoe Bay Unit by BPXA for many years without
sufficient regard for the ever-increasing needs and associated costs of
running an aging oil field.

The extensive investigation into the facts surrounding the March and
August 2006 leaks from the OTL's operated by BPXA in the Prudhoe Bay Unit
was a joint federal and state effort that involved many technical and
complex issues, complicated evidence collection, numerous interviews, the
review of numerous records and documents, and consultation with experts.
The U.S. Environmental Protection Agency, Criminal Investigation Division
and the Federal Bureau of Investigation conducted the investigation with
assistance from the U.S. Department of Transportation (DOT) Pipeline and
Hazardous Materials Safety Administration in the form of expert
consultation, the DOT Office of Inspector General, and the Alaska
Department of Environmental Conservation, Environmental Crimes Unit with
regard to the initial response to the spills.

Source: U.S. Department of Justice