BP 2012 Annual Report Download - page 172

claims in the complaint. Evidentiary hearings in the arbitration occurred in
May and June 2012, and an award was issued by the arbitration panel in
November 2012 in the approximate amount of $245 million. BPXA’s
working interest share of that award is approximately $66 million. All
amounts due to the State of Alaska in this matter were paid in November
2012.
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.
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 complaint in
the False Claims Act lawsuit seeking an injunction shutting down the
Atlantis platform. The court denied BP’s motion to dismiss the complaint
in March 2011. Separately, also in March 2011, BOEMRE issued its
investigation report of the Abbott Atlantis allegations, which concluded
that Kenneth Abbott’s allegations that Atlantis operations personnel
lacked access to critical, engineer-approved drawings were without merit
and that his allegations about false submissions by BP to BOEMRE were
unfounded. Trial was scheduled to begin on 10 April 2012, but the trial
date was vacated and not rescheduled pending consideration of the
parties’ summary judgment motions.
Various non-governmental organizations (“NGOs”) and the EPA
challenged certain aspects of the air permits issued by the Indiana
Department of Environmental Management (IDEM) related to the Whiting
refinery modernization project. BP has been in discussions with the EPA,
the IDEM and certain environmental groups over these and other Clean
Air Act (CAA) issues relating to the Whiting refinery. BP has also been in
discussions with the EPA regarding alleged CAA violations at the Toledo,
Carson and Cherry Point refineries.
On 23 May 2012, BP Products North America, Inc., the EPA, the
Department of Justice (DoJ), the IDEM and the NGOs resolved objections
to the air permit for the Whiting refinery modernization project and settled
allegations of air emissions violations at the Whiting refinery. The
settlement requires emission reduction projects with an estimated cost of
approximately $400 million and the payment of a civil penalty of $8 million.
The settlement was approved by the federal court on 6 November 2012.
On 20 December 2012 IDEM issued the final, revised air permit for the
modernization project that incorporates the relevant consent decree
provisions.
An application was brought in the English High Court on 1 February 2011
by Alfa Petroleum Holdings Limited and OGIP Ventures Limited against
BP International Limited and BP Russian Investments Limited alleging
breach of a Shareholders Agreement on the part of BP and seeking an
interim injunction restraining BP from taking steps to conclude, implement
or perform the transactions with Rosneft Oil Company, originally
announced on 14 January 2011, relating to oil and gas exploration,
production, refining and marketing in Russia (the Arctic Opportunity).
Those transactions included the issue or transfer of shares between
Rosneft Oil Company and any BP group company (pursuant to the Rosneft
Share Swap Agreement). The court granted an interim order restraining
BP from taking any further steps in relation to the Arctic Opportunity
pending an expedited UNCITRAL arbitration procedure in accordance with
the Shareholders Agreement between the parties. The arbitration
commenced and the interim injunction was continued by the arbitration
panel. On 17 May 2011, BP announced that both the Rosneft Share Swap
Agreement and the Arctic Opportunity, originally announced on
14 January 2011, had terminated. This termination was as a result of the
deadline for the satisfaction of conditions precedent having expired
following delays resulting from the interim orders referred to above. These
interim orders did not address the question of whether or not BP
breached the Shareholders Agreement. The arbitration proceedings,
which addressed the allegation of breach by BP for late notification to
TNK-BP shareholders Alfa, Access and Renova (AAR) of the Arctic
Opportunity, was settled on 13 November 2012 as part of a settlement of
all the outstanding disputes between BP and AAR.
Five minority shareholders of OAO TNK-BP Holding (TBH) filed two civil
actions in Tyumen, Siberia, against BP Russian Investments Limited
(BPRIL) and BP p.l.c. and against two of the BP nominated directors of
TBH. These two actions sought to recover alleged losses to TBH of $13
billion and $2.7 billion respectively arising from the failure to involve TNK-
BP in BP’s proposed alliance with Rosneft. On 11 November 2011, the
Tyumen Court dismissed both claims fully on their merits. The plaintiffs
appealed both of these decisions to the Omsk Appellate court. On
26 January 2012, the Appellate court upheld the Tyumen Court’s
dismissal of the claim in relation to the BP nominated directors of TBH.
The Omsk Appellate court subsequently upheld the Tyumen court of first
instance’s dismissal of the minority suits against BPRIL and BP p.l.c. The
plaintiffs then appealed both of the Omsk Appellate court decisions to the
cassation court of appeal in Tyumen. The cassation court upheld the
dismissal of the claim against the BP nominated directors, and the case
against the BP nominated directors is now resolved. However, the
cassation court remitted the case against the BP companies back to the
Tyumen Court of first instance for reconsideration. The plaintiffs amended
their claim to reduce their damages to approximately $8.6 billion. On
27 July 2012 the Tyumen Court ruled in favour of the plaintiffs and
awarded $3.0 billion in damages against the BP companies. BPRIL filed an
appeal of the Tyumen Court’s decision with the Omsk Appellate court. In
addition, Rosneft and BP-nominated directors of TNK-BP Ltd. filed
statements in support of the contention that the award is unjustified, and
the plaintiffs’ claims wholly without merit. On 25 October 2012 the Omsk
Appellate court adjourned its hearing of the appeal until 9 November 2012
and subsequently until 14 December 2012. At that hearing the minority
shareholder petitioned the court to withdraw the lawsuit. The court
adjourned that hearing until 24 January 2013 upon the motion of Rosneft.
At the hearing on 24 January 2013 the court acceded to the motion of the
minority shareholder to withdraw the claim and ruled that the claim should
be withdrawn. Rosneft has appealed this ruling to the Tyumen Court of
Cassation on the basis that the claim should be dismissed on the merits
170 Additional disclosures
BP Annual Report and Form 20-F 2012