A subsidiary to British Petroleum in Alaska has agreed to more closely monitor and manage the integrity of its pipelines for corrosion as part of an agreement with the U.S. government following the 2006 spill of about 212,000 gallons of crude oil into waters of the northernmost U.S. state.
The Associated Press reports BP Exploration Alaska also agreed to remit a $25 million federal penalty for the spill that first began in March before a second leak spilled oil from company pipelines on the North Slope.
Announced on Tuesday, the $25 million fine sets a precedent by marking the biggest civil penalty ever exacted. The figure dwarfs the statutory limit because the agreement includes settling claims on top of the spill of oil, according to the Environmental Protection Agency.
"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," assistant U.S. Attorney Ignacia S. Moreno told reporters during a conference call.
The agreement was just and mutually acceptable to the company, an official told the news service via an email message.
"A penalty was agreed upon," according to the note from spokesman Steve Rinehart. "We believe the terms of the agreement are fair."
Rinehart also noted operations will be monitored by an independent contractor.
A leak in the transit line sprouted in March 2006. The majority of spilled oil derived from that leak, which occurred between the center for gathering and the pump station. After four months, the company started exploring the inside of pipelines with devices that sense abnormalities. By that time, the second leak burst open.
Karen Loeffler, U.S. attorney for Alaska, said the penalty declares that BP acknowledged shoddy workmanship and failure to properly secure the pipelines.
The sensory devices picked up on 16 locations where corrosion was possible and shuttered only part of the large-size oil field.
But in 2007, criminal proceedings saw BP acknowledge its guilt for the spills, for which the company incurred fines of $20 million, $12 million of which was criminal in nature, according to Cynthia Giles, assistant administrator of the EPA office of enforcement and compliance assurance.
The top official at the transportation department pipeline and hazardous materials safety administration said the office ordered BP to repair the serious safety issues that agency investigators found. After BP did not correct those problems for one year, the government filed the civil litigation.
But the function of the independent monitor will be to continue following the offending company's commitment to conform with the agreement with the government. BP's record of passively allowing deadlines to lapse serves as an indicator that the company must be followed with vigilance, according to the EPA assistant administrator.
"We are not going to just take BP at its word," Giles told the news service.
But the company has strived to improve the management of its suspect pipelines, the spokesman said. BP has devoted more resources, more human capital and more advanced processes to the cause.
"This includes more staff, more spending, newer technology, more frequent inspections, and fewer leaks," according to Rinehart, who noted BP augmented and modernized leak-detection devices as well as anti-corrosion systems.
Those upgrades cost the company $500 million by the end of 2008, Rinehart noted.
At 12:14 p.m. on Thursday, Brent crude oil futures dropped 5.87 percent in value, a $7.11 dive to $114.08 per barrel.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.