A tribunal of arbitrators has awarded the State of Alaska $255 million in a dispute with BP over tax losses over production shortfalls dating back to Prudhoe Bay pipeline leaks and replacements in 2006, state officials announced Thursday.
The decision by the three arbitrators -- Mark Kantor, Thomas Reavley and Thomas Brewer -- says the losses occurred due to incidents at both Prudhoe Bay and the Greater McIntyre Point Area.
While BP argued that any losses in production were short-lived and made up for by rebounds in subsequent production under higher oil prices, the tribunal dismissed the company’s position in its unanimous Oct. 31 decision, following a four-week hearing in May and June.
“In summary, we find (BP’s) rebound argument unpersuasive because it classifies as rebound production improvements caused by unrelated and entirely normal operating activities, and because the evidence established to our satisfaction that the production improvements achieved at (both locations) during 2006¿2010 were not due to real ‘rebound,’ properly defined,” the arbitrators wrote.
BP spokesperson Dawn Patience says the company has taken several steps to prevent future incidents like those in 2006. In addition to spending $500 million to replace the pipeline system that leaked, spending on corrosion monitoring and prevention has tripled since 2004 to $120 million in 2011.
Patience says BP now conducts more than 160,000 pipeline inspections each year. Inspections using “smart pig” robotic monitors sent through pipelines have quadrupled, and workers routinely use infrared technology to examine pipes.
According to the arbitrators’ ruling, the award -- described by the state in a Thursday statement as "final, binding, and non-appealable" -- includes a total of $200 million in lost tax revenue, as well as about $45 million in interest and an additional $10 million in civil assessments for the spills.
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