State claims delay in Alaska oil spill case

ANCHORAGE, Alaska - The state claims BP Exploration (Alaska) Inc. is trying to delay a lawsuit over Prudhoe Bay oil spills in 2006 by requesting that regulators handle much of the case.

In documents filed in Superior Court, attorneys for the state argued that BP was trying to diminish the magnitude of the spills by asking to dismiss part of the case and move it to the Alaska Oil and Gas Conservation Commission.

The state sued the oil company March 31, seeking fines and punitive damages plus back taxes for pipeline repairs and a production shortfall of at least 35 million barrels of oil caused by two spills in 2006.

BP runs Prudhoe Bay, the nation's largest oil field, on behalf of itself and the other holders of state leases.

The state noted "the March 2006 spill prompted immediate pipeline integrity inspection orders and investigations by state and federal agencies, and ultimately led to BPXA's conviction for criminal negligence under the Clean Water Act."

After BP pleaded guilty in late 2007 to the federal pollution misdemeanor, a judge put the company's Alaska subsidiary on probation for three years and ordered more than $20 million in penalties.

The legal battle over the fines and compensation to the state could be long and costly.

Steve Mulder, a chief assistant attorney general in the state Department of Law's environmental section, has said the state is seeking back taxes and other collections that could tally as much as $1 billion.

BP already has drawn criticism from the 2006 spills and the pipeline corrosion scandal, not only from regulators but from members of Congress for lax maintenance of key pipelines in Prudhoe.

The state now wants a jury trial. To help with the case, it has hired an outside law firm, K&L Gates.

Lawyers on both sides agree the case is complex. To help manage it, Superior Court Judge Peter Michalski of Anchorage has appointed a "discovery master" to referee trial preparations. Dan Hensley will make $300 an hour for the job.

BP's lawyers, in their motion to dismiss part of the case, argue the state is "overreaching" with an improper lawsuit.

But state lawyers contend BP's arguments lack merit and "all of the state's claims must be allowed to go forward."

Just when the case will come to trial is unclear.

A written summary of a recent conference before Michalski says lawyers agree the trial "probably won't be ready in a year." The summary indicates the two sides have "attempted some form of settlement already."

For now, the issue is whether BP will succeed in getting any of the state's key claims thrown out.

BP's lawyers argue the state is improperly pursuing "tort claims" when it has the power to discourage oil spills and punish offenders under oil and gas leases and unit agreements — what amount to contracts.

A contract claim is typically a separate legal action from a tort claim, which is generally a lawsuit for a wrongful act that causes injury.

State attorneys urged the judge to reject BP's arguments.

"BPXA argues unpersuasively ... that the oil and gas leases and unit agreements, which are contracts between it and the state, preclude the state from asserting tort claims against BPXA when the tort claims and breach of contract claims are based upon the same conduct," they wrote in the 49-page filing.

They noted: "Alaska law is clear that the state may bring both contract and tort claims in this lawsuit."

___

Information from: Anchorage Daily News, http://www.adn.com

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.