While the federal government is set to gain $25 million from settling BP’s 2006 oil spill, the pipeline coatings industry may also benefit from the deal.
In addition to the $25 million civil penalty BP Exploration Alaska will pay for the 5,078-barrel spill on Alaska’s North Slope, the 64-page federal-court Consent Decree requires the company “to significantly improve inspection and maintenance of its pipeline infrastructure on the North Slope to reduce the threat of additional oil spills.”
The BP North Slope Clean Water Act Settlement, announced Monday (May 4), requires BPXA “to develop and implement a comprehensive program to maintain the integrity of the entire Prudhoe Bay pipeline system, consisting of over 1600 miles of pipeline, including both transportation and production lines.” The network must be inspected and all “actionable anomalies” repaired promptly, the decree says.
The spill was the largest ever on Alaska’s oil fields.
The Integrity Management Program (IMP) must address corrosion and other threats to both the oil transit pipelines and the upstream production pipelines on the North Slope, according to the consent decree. The program includes collection of coatings data.
In all, the program will cost about $60 million over three years, the government said. BP Alaska has already spent $200 million replacing the lines that leaked on the North Slope.
|A worker responds in March 2006 to BPXA’s pipeline spill on Alaska’s North Slope.|
BPXA must also operate the oil transit pipelines as potentially affecting “high consequence areas”—a designation that triggers the pipeline integrity regulations of the Department of Transportation’s Office of Pipeline Safety.
BPXA must evaluate and report on new leak detection technologies; implement its new Spill Prevention, Control and Countermeasure (SPCC) plan; and improve its asbestos safety training course.
Finally, the company must hire an independent monitoring contractor to apprise the government of BP’s compliance progress.
BP admitted no wrongdoing in the settlement with the Environmental Protection Agency, the Department of Justice and the Pipeline and Hazardous Materials Safety Administration. The company reported the general terms of the agreement on its site, but made no comment.
The spills occurred in March and August of 2006. Investigators from EPA and PHMSA determined that BP Alaska had failed to properly inspect and maintain the pipeline to prevent corrosion.
The consent decree resolves a Justice Department lawsuit filed when BP refused to comply with a PHMSA Corrective Action Order that addressed the pipeline’s risks and ordered pipeline repair or replacement. BP was also found to have violated the Clean Air Act with improper asbestos removal after the spill.
In 2007, BP Alaska pled guilty to one misdemeanor violation of the Clean Water Act for the March spill, was sentenced to three years’ probation, and paid a $20 million criminal penalty.
(On Nov. 29, 2009, about 360 barrels of crude oil leaked out of a BPXA line into the Lisburne Processing Center in Prudhoe Bay. In November 2010, the US Probation Officer filed a federal-court petition to revoke BPXA’s 2007 probation, contending that the Lisburne spill had violated the probation terms. A hearing is scheduled for September.)
Cynthia Giles, of EPA’s Office of Enforcement and Compliance Assurance, said the new penalty—the highest per barrel ever imposed—reflected BP’s “gross negligence” in the spill.
The case “sends a message that we intend to use that authority and to insist that BP Alaska and other companies act responsibly to prevent pipeline oil spills,” she said.
Assistant Attorney General Ignacia S. Moreno said the 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.”
Of the $25 million penalty, $20.05 million will be deposited in the Oil Spill Liability Trust Fund established under the Clean Water Act. The rest will be paid to the U.S. Treasury.
The consent decree is subject to a 30-day public comment period and final court approval.
BP Reports $5.4B Profit
BP Alaska should have little trouble paying its penalty. On April 27, parent company BP released first-quarter FY 2011 results that showed replacement cost profit of $5.4 billion—a $1 billion gain over the fourth quarter of 2010.
Per-share prices increased to $29.13 in the first quarter from $24.55 in Q4 of 2010.
Alberta Fights New Leak
Meanwhile, Canadian authorities are demanding answers after more than 28,000 barrels of crude oil poured out of the Plains Midstream Canada Rainbow pipeline last week.
The leak—Alberta’s largest ever—raised new questions about Alberta’s aging pipeline system. The pipeline leak is the second in several weeks and the second major spill from the Rainbow line since 2006.
Investigators traced the 2006 spill, which released 7,500 barrels of oil, to “stress corrosion cracking, fatigue cracking and external coating failure."