BP 2011 Annual Report Download - page 167

Additional information for shareholders
BP Annual Report and Form 20-F 2011 165
Additional information for shareholders
In October 2009 OSHA issued citations to the Texas City refinery seeking
a total of $87.4 million in civil penalties for alleged violations of the 2005
Agreement and alleged process safety management violations.
A settlement agreement between BP Products and OSHA in
August 2010 (2010 Agreement) resolved the petition filed by BP Products
in September 2009 and the alleged violations of the 2005 Agreement.
BP Products has paid a penalty of $50.6 million in that matter and
agreed to perform certain abatement actions. Compliance with the 2010
Agreement (which is set to expire on 12 March 2012) is also a condition of
probation due to the linkage between this 2010 Agreement and the 2005
Agreement.
On 6 May 2010, certain persons qualifying under the US Crime
Victims’ Rights Act as victims in relation to the Texas City plea agreement
requested that the federal court revoke BP Products’ probation based
on alleged violations of the Court’s conditions of probation. The alleged
violations of probation relate to the alleged failure to comply with the 2005
Agreement.
The OSHA process safety management citations issued in October
2009 were not resolved by the August 2010 settlement agreement.
The proposed penalties in that matter are $30.7 million. The matter is
currently before the OSH Review Commission which has assigned an
Administrative Law Judge for purposes of mediation. These citations do
not allege violations of the 2005 Agreement.
A shareholder derivative action was filed against several current
and former BP officers and directors based on alleged violations of the US
Clean Air Act (CAA) and Occupational Safety and Health Administration
(OSHA) regulations at the Texas City refinery subsequent to the March
2005 explosion and fire. An investigation by a special committee of
BP’s board into the shareholder allegations has been completed and the
committee has recommended that the allegations do not warrant action
by BP against the officers and directors. BP filed a motion to dismiss the
shareholder derivative action and a plea to the jurisdiction. On 16 June
2011, the court granted BP’s plea to the jurisdiction and dismissed the
action in its entirety. The shareholder has appealed the dismissal and the
appeal is pending.
In March and August 2006, oil leaked from oil transit pipelines
operated by BP Exploration (Alaska) Inc. (BPXA) at the Prudhoe Bay unit
on the North Slope of Alaska. Several legal proceedings resulted from
these events. On 29 November 2007, BPXA entered into a criminal plea
agreement with the DoJ relating to these leaks. BPXA’s guilty plea, to a
misdemeanour violation of the US Water Pollution Control Act, included
a term of three years’ probation. On 29 November 2009, a spill of
approximately 360 barrels of crude oil and produced water was discovered
beneath a line running from a well pad to the Lisburne Processing Center
in Prudhoe Bay, Alaska. On 17 November 2010, the US Probation Officer
filed a petition in federal district court to revoke BPXA’s probation based
on allegations that the Lisburne event was a criminal violation of state
and federal law and therefore BPXA was in violation of its probation
obligations. BPXA contested the petition at an evidentiary hearing that
was completed on 7 December 2011 in U.S. District Court in Anchorage,
Alaska. On 27 December 2011, the Court issued a decision and order
finding that BPXA did not violate the terms of its probation, dismissing the
government’s petition and terminating BPXA’s probation.
On 12 May 2008, a BP p.l.c. shareholder filed a consolidated
complaint alleging violations of federal securities law on behalf of a putative
class of BP p.l.c. shareholders against BP p.l.c., BPXA, BP America, and
four officers of the companies, based on alleged misrepresentations
concerning the integrity of the Prudhoe Bay pipeline before its shutdown
on 6 August 2006. On 8 February 2010, the Ninth Circuit Court of Appeals
accepted BP’s appeal from a decision of the lower court granting in part
and denying in part BP’s motion to dismiss the lawsuit. On 29 June
2011, the Ninth Circuit ruled in BP’s favour that the filing of a trust related
agreement with the SEC containing contractual obligations on the part of
BP was not a misrepresentation which violated federal securities laws. The
BP p.l.c. shareholder has filed an amended complaint, in response to which
BP filed a new motion to dismiss, which is pending. On 31 March 2009,
the United States filed a complaint seeking civil penalties and damages
relating to the events at Prudhoe Bay. The complaint also involved claims
related to asbestos handling, allegations of non-compliance at multiple
facilities for failure to comply with EPA’s spill prevention plan regulations,
and for non-compliance with US Department of Transportation orders and
regulations. The parties settled the dispute and on 13 July 2011 the Court
entered a Consent Agreement in which BPXA agreed to pay a $25-million
penalty and to perform certain injunctive measures over the next three
years with respect to pipeline inspection and maintenance. On 31 March
2009, the State of Alaska filed a complaint seeking civil penalties and
damages relating to these events. The complaint alleges that the two
releases and BPXA’s corrosion management practices violated various
statutory, contractual and common law duties to the State, resulting
in penalty liability, damages for lost royalties and taxes, and liability for
punitive damages. In December 2011, the State of Alaska and BPXA
entered into a Dispute Resolution Agreement concerning this matter that
will result in arbitration of the amount of the State’s lost royalty income and
payment by BPXA of the additional amount of $10 million on account of
other claims in the complaint.
Approximately 200 lawsuits were filed in state and federal courts
in Alaska seeking compensatory and punitive damages arising out of the
Exxon Valdez oil spill in Prince William Sound in March 1989. Most of
those suits named Exxon (now ExxonMobil), Alyeska Pipeline Service
Company (Alyeska), which operates the oil terminal at Valdez, and the
other oil companies that own Alyeska. Alyeska initially responded to
the spill until the response was taken over by Exxon. BP owns a 46.9%
interest (reduced during 2001 from 50% by a sale of 3.1% to Phillips)
in Alyeska through a subsidiary of BP America Inc. and briefly indirectly
owned a further 20% interest in Alyeska following BP’s combination with
Atlantic Richfield. Alyeska and its owners have settled all the claims against
them under these lawsuits. Exxon has indicated that it may file a claim for
contribution against Alyeska for a portion of the costs and damages that it
has incurred. If any claims are asserted by Exxon that affect Alyeska and its
owners, BP will defend the claims vigorously.
Since 1987, Atlantic Richfield Company (Atlantic Richfield), a
subsidiary of BP, has been named as a co-defendant in numerous lawsuits
brought in the US alleging injury to persons and property caused by lead
pigment in paint. The majority of the lawsuits have been abandoned or
dismissed against Atlantic Richfield. Atlantic Richfield is named in these
lawsuits as alleged successor to International Smelting and Refining
and another company that manufactured lead pigment during the period
1920-1946. Plaintiffs include individuals and governmental entities.
Several of the lawsuits purport to be class actions. The lawsuits seek
various remedies including compensation to lead-poisoned children, cost
to find and remove lead paint from buildings, medical monitoring and
screening programmes, public warning and education of lead hazards,
reimbursement of government healthcare costs and special education for
lead-poisoned citizens and punitive damages. No lawsuit against Atlantic
Richfield has been settled nor has Atlantic Richfield been subject to a final
adverse judgment in any proceeding. The amounts claimed and, if such
suits were successful, the costs of implementing the remedies sought in
the various cases could be substantial. While it is not possible to predict
the outcome of these legal actions, Atlantic Richfield believes that it has
valid defences. It intends to defend such actions vigorously and believes
that the incurrence of liability is remote. Consequently, BP believes that
the impact of these lawsuits on the group’s results, financial position or
liquidity will not be material.
On 8 March 2010, OSHA issued citations to BP’s Toledo refinery
alleging violations of the Process Safety Management Standard, with
penalties of approximately $3 million. These citations resulted from an
inspection conducted pursuant to OSHA’s Petroleum Refinery Process
Safety Management National Emphasis Program. BP Products has
contested the citations, and the matter is currently scheduled for trial
before the OSH Review Commission in June 2012.
In April 2009, Kenneth Abbott, as relator, filed a US False Claims
Act lawsuit against BP, alleging that BP violated federal regulations, and
made false statements in connection with its compliance with those
regulations, by failing to have necessary documentation for the Atlantis
subsea and other systems. BP is the operator and 56% interest owner
of the Atlantis unit in production in the Gulf of Mexico. That complaint
was unsealed in May 2010 and served on BP in June 2010. Abbott seeks
damages measured by the value, net of royalties, of all past and future
production from the Atlantis platform, trebled, plus penalties. In September
2010, Kenneth Abbott and Food & Water Watch filed an amended