Prudhoe Bay oil spill civil fines hit BP’s stock

BP Prudhoe Bay Oil SpillThe Environmental Protection Agency (EPA) reveals that BP has been charged 25 million dollars in civil fines for the oil spill that occurred in Alaska’s main oil producing region of Prudhoe Bay in 2006. All total, BP will pay 85million dollars in penalties and civil fines.

In 2006 a BP oil pipe leaked over five thousand barrels worth of crude oil on Alaska’s North Slope. Investigations show the leak was the result of a hole that had corroded in the pipeline. Five months later another leak occurred in the same area.

After the secondary spill occurred in Alaska (2006) BP spent more than 500 million and replaced the entire pipeline system in Prudhoe Bay. At the trial in 2007, BP was ordered to spend 60 million over a three year period to enhance pipeline maintenance and focus on the prevention of corrosion and other pipeline issues.

The government fine in the recent civil charges averaged around five thousand dollars per barrel of oil leaked; the highest per barrel fine ever given. The EPA assistant administrator for enforcement commented that the fine was high because the spill was the result of BP’s gross negligence.

This incident is just one in a long line of accidents and spills for the BP Company. In 2005 a Texas City refinery had an explosion that killed 15 workers; investigations show that management had focused on cutting costs by reducing maintenance and other capital spending. This was also (partially) the cause for the Alaska oil spill.  

As it turns out, management was evaluated and had performance reviews directly related to how well they met the objective of reducing capital and company spending. Despite being fined and placed on probation for three years, BP has continued to have problems.

Four more pipeline spills and clogging incidents in 2008 and 2009, equipment failure and improperly installed warning systems, also in 2008 and 2009. Then the Transocean (RIG) accident and spill in the Gulf of Mexico in 2010. When news was released regarding the Alaska settlement, BP’s stocks lost 2.5 percent on the New York market.

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