BP to pay $85 million to settle Alaska oil spill case

WASHINGTON Tue May 3, 2011 9:34pm BST

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WASHINGTON (Reuters) - BP (BP.L) has agreed to pay a $25 million (15 million pounds) civil penalty, as well as spend $60 million on enhanced safety measures, to settle a federal probe of a pipeline oil spill on Alaska's North Slope in 2006, the government said on Tuesday.

The oil spill in Alaska is one of several environmental and safety problems that have beset BP in the United States in recent years, including a deadly explosion at an oil refinery in Texas that killed 15 workers and most recently last year's historic oil spill in the Gulf of Mexico.

In 2006, more than 5,000 barrels of crude leaked onto the snow-covered tundra from a corrosion-eaten hole in BP's pipeline in Prudhoe Bay.

After the pipeline spill and another leak of 24 barrels of oil five months later, BP replaced its entire Prudhoe Bay transit line system, at a cost of $500 million.

As part of the settlement for the spill and other violations, BP will spend an additional $60 million over three years to address corrosion and other threats to these pipelines, the government estimated.

The $25 million civil fine is the highest penalty per barrel spilt the U.S. government has ever assessed for an oil spill, the Environmental Protection Agency said.

The penalty was higher because "the spill was the result of gross negligence on the part of BP," Cynthia Giles, assistant administrator for enforcement at the EPA, told reporters on a conference call.

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

BP'S GULF OIL SPILL

The Prudhoe Bay accident was the biggest spill on record on the North Slope, Alaska's main oil-producing region, but that spill was dwarfed by the nearly 5 million barrels spewed from BP's ruptured Macondo well last summer.

The British oil giant is still dealing with the fallout from the massive Gulf oil spill, the largest offshore oil spill in U.S. history.

The U.S. government filed a civil lawsuit in December against BP and its partners on the well for the Gulf spill and BP faces up to $21.1 billion in fines under the Clean Water Act if it is deemed grossly negligent.

These fines and possible punitive damages could significantly boost BP's predicted bill of $41.3 billion for the Gulf spill.

BP's stock was down about 1 percent in London and 2.5 percent in New York on news of the settlement related to the Prudhoe Bay spill.

The government said the company also violated the Clean Air Act when it improperly removed asbestos-containing materials from its pipelines.

The civil settlement comes after BP Alaska pleaded guilty in 2007 to one misdemeanour criminal violation of the Clean Water Act for the Prudhoe Bay spill and was sentenced to three years probation and fined $20 million.

A federal probation officer filed a petition last November to revoke the company's probation and impose additional penalties, saying a 2009 oil spill from a pipeline at the BP's Lisburne field showed the company had failed to undertake the reforms it promised in its plea agreement.

(Reporting by Jeremy Pelofsky and James Vicini; additional reporting by Tom Doggett and Yereth Rosen; Editing by David Gregorio and Lisa Shumaker)

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