BP Is Fined $25 Million for ’06 Spills at Pipelines

The fine is the largest per-barrel assessment ever levied against an oil company in a spill case and represents a new blow to BP’s corporate treasury and reputation.

The aggressive approach of federal prosecutors in this case could portend huge fines and penalties from BP’s much larger spill in the Gulf of Mexico last year. That case, which is still under investigation, could cost the British oil giant more than $20 billion if the company is found grossly negligent, as it was in the Alaska pipeline matter.

“This 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,” Ignacia S. Moreno, head of the environmental enforcement division at the Justice Department, said in a conference call with reporters. “This agreement will help prevent future environmental disasters and protect the fragile ecosystem of Alaska’s North Slope.”

Ms. Moreno declined to answer any questions about the investigation into the Deepwater Horizon explosion and spill in the gulf in April 2010, which killed 11 people and poured nearly five million barrels of oil into the ocean.

BP Exploration Alaska owns the largest share of the consortium that runs the pipeline and depends on income from North Slope production to pay for damages caused by the gulf blowout.

As a result of corrosion and poor maintenance of its pipelines in Alaska, BP was found responsible for the discharge of more than 5,000 barrels of oil onto the Arctic tundra and into a lake on the North Slope in March 2006; a much smaller spill occurred in August of that year. The company paid more than $20 million in criminal fines and restitution and was ordered to perform extensive repairs on its system of 1,600 miles of pipelines.

The Department of Transportation’s pipeline safety division determined that BP had failed to fully comply with the order to clean and replace miles of pipeline, and the government sued the company again in 2009.

The consent decree announced on Tuesday requires BP to develop a program to maintain the safety and integrity of its pipelines and will subject the company to enhanced surveillance of its operations by federal regulators. The company also will be required to hire an outside monitor to ensure that it is regularly inspecting and maintaining its pipelines.

“We are not just going to take BP at its word,” said Cynthia Giles, director of the Environmental Protection Agency’s office of enforcement and compliance assurance. “This requires an independent monitor to assure that BP is fully complying with the terms of today’s settlement. This case sends a clear message that we are vigorously enforcing the nation’s environmental laws.”

Since the Deepwater Horizon spill and a fatal natural gas pipeline explosion last year in San Bruno, Calif., federal regulators have been taking a much harder regulatory line on drilling permits and pipeline inspections in general.

In a brief statement, BP said the company did not admit to any liability in reaching the agreement with the government. The company also said the penalty was not calculated on a per-barrel basis, although government officials described the payment in those terms. BP did not say how it was calculated or offer specifics.

The settlement must be ratified by a federal court to take effect.

Alaska’s North Slope is one of BP’s most important oil fields and provides a vital income stream. BP produces nearly two-thirds of the 600,000 barrels a day that come from the North Slope, a giant oil field that has been in decline for many years but still produces about 3 percent of the crude oil consumed by the United States.

Last week BP reported a first-quarter profit of $5.37 billion excluding one-time items and inventory changes, down 4 percent from a year earlier. The results included a $400 million charge related to the gulf spill.