BP to pay $25 million fine for 2006 North Slope spills

The British corporation at the center of last year's Gulf of Mexico spill will pay a $25 million penalty for the largest oil spill ever on Alaska's North Slope and spend an additional $60 million upgrading its oversight of corroded pipelines in Alaska.

The U.S. Department of Justice and the Environmental Protection Agency on Tuesday reached a settlement agreement with BP Alaska, a subsidiary of BP America, for two back-to-back spills in 2006. The largest of the spills, in March of that year, dumped 212,000 gallons of oil onto the tundra from a worn-out section of pipe that hadn't been properly inspected in years.

"I think this is very significant," said Karen Loeffler, U.S. attorney for the state of Alaska. "The settlement makes clear that those companies that transport hazardous materials have to put in the money and put up the plans to maintain the integrity of their systems so that we don't have oil spills."

BP Alaska spokesman Steve Rinehart said in an email, "We believe the terms of the agreement are fair."

Tuesday's announcement comes as Alaska and federal officials are still trying to get a grip on the status of thousands of miles of aging oil pipelines on the North Slope, some of which are badly in need of repair.

A study last fall by the state showed that while the frequency of spills in Alaska's oil fields showed no trend up or down, the spills seemed to be getting more severe and the biggest of those spills were usually caused by corrosion.

And BP, which runs oil production on the North Slope for itself and several other companies, has a history of poor pipeline management.

BP had been on probation in the early 2000s for illegally dumping toxic waste on a Prudhoe Bay island. Just as its probation was expiring in 2005, an explosion at a BP refinery in Texas City, Texas, killed 15 people.

When, a year later, BP had its two pipeline leaks, members of Congress from both parties expressed frustration and outrage. Rep. Joe Barton, R-Texas — generally sympathetic to the oil industry — complained that "BP's policies are as rusty as its pipelines."

Investigators had discovered that BP, unlike other oil companies, hadn't regularly sent inspection "pigs" through its pipelines since 1998. Then, after the 2006 spills, federal pipeline-safety inspectors ordered repairs, but BP didn't fully comply. So the Justice Department filed criminal charges.

BP pleaded guilty in 2007, paid a $20 million fine and was put on criminal probation again. Tuesday's penalties come in addition to those fines.

The federal government claims the settlement amounts to the largest penalty per barrel of oil for a spill in history. And that doesn't count the $200 million BP already spent replacing the transit lines where the leaks occurred.

But an internal BP maintenance report initially uncovered last fall by the nonprofit investigative news organization ProPublica showed that roughly 150 other spots on BP Alaska's 1,600 miles of pipeline were in critically poor shape.

With the settlement, "The intention was to be as comprehensive as we can to address the pipelines of the type that gave rise to this kind of corrosion problem," said Cynthia Giles, assistant administrator for EPA's Office of Enforcement. The settlement "also provides for an independent monitor to evaluate BP's compliance."

But BP's battles with the government in Alaska aren't over. Tuesday's settlement comes as BP awaits a court hearing in September, during which the Justice Department will ask a judge to punish BP even more, after a November 2009 North Slope spill of 46,000 gallons.

At that time, the Justice Department maintains, BP was still on criminal probation from the 2006 spills.

If the court agrees, BP could face even more fines and penalties.

Craig Welch: 206-464-2093 or cwelch@seattletimes.com