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BP to pay Alaska $255M for lost oil production

Associated Press Modified: November 8, 2012 at 7:30 pm •  Published: November 8, 2012

North Slope pipeline corrosion came under intense public scrutiny with two large oil spills in 2006. Both spills were traced to BP's failure to regularly clean and inspect two of its pipelines over the course of several years.

BP ultimately agreed with federal prosecutors to pay $20 million in fines and restitution for the first spill, the largest ever at Prudhoe Bay. The spills also led BP to replace 16 miles of transit lines.

The state of Alaska, which relies on oil taxes for about 90 percent of its revenue, sought what it would have earned in royalties from the lost production during the spills and shutdowns to replace pipe. BP argued the production wasn't lost, only delayed, and said it shouldn't have to pay anything.

Both sides agreed to arbitration to avoid expensive legal costs.