* Judge rules no oil tax due when no production
* BP says pleased with ruling
* State still claiming lost oil royalties
By Yereth Rosen
ANCHORAGE, Alaska, Dec 14 An Alaska judge has
dismissed the state's claim that BP owes several hundreds of
millions of dollars in tax revenues the state claims it lost
when the Prudhoe Bay oil field was partially shut down in 2006
because of a BP oil spill.
The state's claims that it deserved compensation for lost
taxes are not supported or defined in law as recoverable
economic damages, State Superior Court Judge Peter Michalski
said in an order issued Friday but only widely noticed on
The ruling resolves most damage claims made by the state in
its 2009 lawsuit against BP for alleged state losses from the
2006 Prudhoe Bay pipeline spills and partial field shutdown.
The entire lawsuit sought about $1 billion in civil damages,
state officials said at the time the action was filed.
Additionally, Michalski said, oil taxes can be collected
only when there is production.
"Taxes become due upon the occurrence of a taxable event.
In order to sustain a claim for lost tax damages, it is
necessary for the state to allege that a taxable event
occurred. Here, there has been no taxable event, and therefore
(BP) cannot owe taxes," he said.
The vast majority of the alleged damages were for tax and
royalty revenues the state claimed were foregone when BP
temporarily shut down half of Prudhoe Bay production. Revenue
losses due to Prudhoe Bay problems stretched over out for two
years, the state claimed in its original complaint.
The state is also seeking payment of penalties and fines
for what it claims were breaches of safety and spill-prevention
Spokesmen for BP Exploration Alaska Inc -- the oil giant's
unit in the state -- and for the state gave only brief comments
on Tuesday in response to Michalski's decision.
"We are pleased with the ruling," BP spokesman Steve
Rinehart said in an email.
"We're reviewing the decision, considering our options,"
Bill McAllister, spokesman for the Alaska Department of Law,
said in an email.
BP attorneys have argued that the state's claims for lost
tax and royalty revenues are baseless in part because
production was simply deferred, and the oil in the reservoir
was not lost.
Still to be resolved are the state's claims for lost oil
royalties, spill fines and other damages. A 2012 trial date has
been set for the case.
The state lawsuit stems from the 212,252-gallon oil spill
that flowed from a corroded Prudhoe Bay transit pipeline -- the
largest North Slope oil spill on record -- and a subsequent
corrosion-caused spill that triggered the field closure and
other pipeline problems discovered in 2006.
The federal government also sued BP in 2009, seeking
millions of dollars in fines for alleged environmental and
pipeline-safety violations. The federal lawsuit does not seek
compensation for alleged lost oil revenues.
According to a joint motion filed by BP and the U.S.
Justice Department in federal court two months ago, the company
and the federal government have "diligently continued
settlement discussions," but those discussions are complex and
"have taken longer than the parties first anticipated."
(Editing by Bill Rigby and David Gregorio)