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BP sued over Prudhoe Bay management practices

BP sued over Prudhoe Bay management practices

BP PLC executives and its board of directors were negligent in their oversight of pipelines in the Prudhoe Bay oil field in Alaska, resulting in leaks that damaged the company's reputation while exposing it to millions of dollars in penalties and fines, according to a lawsuit filed on behalf of shareholders.
The more than 100-page lawsuit filed Monday in Superior Court in Anchorage says BP executives and the board breached their fiduciary duties in running U.S. operations for the world's second largest oil and gas producer.
Their conduct, the lawsuit says, damaged London-based BP's reputation; hurt the environment; left BP open to costly lawsuits, penalties and fines; increased its operating costs due to burdensome requirements by regulators; and resulted in lost revenues and profits.
It says BP presented itself to shareholders as "an exceptionally progressive, highly ethical and environmentally sensitive corporation, which stressed safety in its operations..."
"However, the true facts were quite different than these corporate fiduciaries presented to BP's owners _ its shareholders," the lawsuit says. "Unfortunately, BP has a long and sordid history of environmental law violations its executives now try to camouflage with a little green and yellow sunburst," a reference to the company's logo.
The lawsuit focuses on recent BP problems, including leaks because of corroded pipes at Prudhoe Bay, a refinery explosion in Texas in which 15 people were killed and investigations into illegal price fixing in the propane market.
Plaintiffs are seeking unspecified damages that could run into the hundreds of millions of dollars, San Diego lawyer William Lerach said Tuesday when reached by telephone in London.
The lawsuit was filed by Unite Here National Retirement Fund, which holds 6,000 BP negotiable certificates.
"We want to send a message loud and clear to the British Petroleum board that they have to vastly improve their oversight of their North American operations," Lerach said. "This company has a terrible record. It is completely inconsistent with how these folks have said they are running this company."
BP Alaska spokesman Daren Beaudo said as a matter of policy the company does not comment on pending litigation.
Some of the Prudhoe Bay pipelines, including the transit oil pipeline that leaked in August forcing a partial shutdown of the largest U.S. oil field, had not been cleaned for 14 years. The sludge was a foot thick, the lawsuit says.
"BP executives and directors neglected key pipelines at the core of the vast Prudhoe Bay field, allowing bacterial-ridden sludge to build up inside the lines and corrosion to go unchecked," the lawsuit says.
It claims that for years BP was "keenly aware of the corrosion problem," but opted instead to cut costs by skimping on maintenance and inspections to increase profitability in the short-term.
"Defendants' grossly negligent _ if not intentional _ failure to oversee the corporate assets of this valuable enterprise have exposed BP to tens of millions of dollars in damages, potentially hundreds of millions of dollars in remedial costs and badly damaged BP's corporate image and reputation," the lawsuit says.
BP shares have also significantly underperformed in recent years, it says.
At the same time, the lawsuit says BP officers and directors were "rewarded handsomely," with some "inside directors" getting bonuses equal to between 120 percent and 150 percent of their salaries.
Defendants include BP Chief Executive John Browne, who is about to retire, and numerous other BP executives and members of the board, as well as BP PLC, BP America, Inc., BP Oil Co., Inc. and BP Exploration (Alaska) Inc.
Lerach said the lawsuit also directs BP to take all necessary actions to reform. Removal of board members would be good, he said.
BP is defending itself in other lawsuits, as well. Senior BP executives face a lawsuit filed in New York by shareholders who claim the oil giant's poor maintenance practices at Prudhoe Bay led to August partial shutdown. The company also faces lawsuits in Texas over the deadly refinery accident.


Updated : 2021-08-03 03:00 GMT+08:00