Olympic, Shell agree to pay $100 million in Bellingham blast
By Steve Miletich

Seattle Times
11 December 2002

WASHINGTON In a plea deal approved by top U.S. Justice Department officials, Olympic Pipe Line and Shell Pipeline have agreed to pay more than $100 million to resolve criminal charges stemming from the 1999 pipeline rupture in Bellingham that killed two boys and a young man, two sources close to the case said. Under an agreement to be disclosed today, Olympic has also agreed to plead guilty to at least one felony charge, and Shell has agreed to plead no contest to at least one felony.

Both pleas stem from alleged violations of pipeline-safety laws, the first time that has occurred in the U.S., the sources said, and the payment would be among the nation's largest ever.

Olympic's former chief manager, Frank Hopf Jr., and Ron Brentson, the former head of the company's computer control- room, have each agreed to plead guilty to at least one felony, both for violating the safety laws.

Hopf has been transferred to Shell, an Olympic partner formerly called Equilon. Brentson was transferred to other duties at Olympic.

Another Olympic employee, Kevin Dyvig, a former computer operator who was moved to another job, has agreed to plead guilty to a misdemeanor count of violating the federal Clean Water Act. The maximum prison sentence is one year.

Full details of the plea agreements are to be disclosed at 10:30 this morning before U.S. District Judge Barbara Rothstein in Seattle. The terms are subject to her approval.

Sentencing would be in March. It is unclear whether any of the employees will have to serve prison time, a question that might be left to Rothstein. The maximum term is five years.

The case had been set to go to trial Jan. 13.

Under the payment plan, Shell would pay about $75 million and Olympic $25 million, the sources said. When it was Equilon, the company provided top executives who ran Olympic at the time of the rupture. BP North American Pipelines now controls Olympic and has made major safety changes.

Most of the payment would fund nationwide efforts to improve pipeline safety, though smaller sums would be for criminal fines and civil penalties, sources said.

A no-contest felony plea is being offered to Shell because its ownership structure has changed since the spill, a source close to the case has said. Equilon was a partnership of Shell and Texaco, but Shell obtained the company earlier this year.

Under a no-contest plea, a defendant does not accept or deny responsibility for the charges but agrees to punishment.

The plea differs from a guilty plea because it cannot be used against a defendant in other court cases. That could affect pending civil suits Shell is facing over huge financial losses arising from the rupture.

If guilty pleas are entered to some counts, they might be carefully crafted to protect Shell and Olympic in the pending suits, said a lawyer close to the matter.

John McKay, the U.S. attorney in Seattle, met with top Justice Department officials here several weeks ago to approve the deal.

The Justice Department requires U.S. attorneys to obtain permission before accepting no-contest pleas, formally called nolo contendere pleas. The department's manual instructs U.S. attorneys to not consent "to a plea of nolo contendere except in the most unusual circumstances" and only with the approval of high-level department officials or the attorney general.

The manual cites a 1953 directive of the attorney general at that time, Herbert Brownell Jr., in which he wrote that no-contest pleas often undermine public confidence in law enforcement.

Olympic and Equilon were indicted last year on multiple felony violations of the federal Pipeline Safety Act and misdemeanor violations of the Clean Water Act.

Convictions on felony charges have been a concern for the companies because their insurers might balk at paying costs arising from the pending civil suits.

The pipeline ruptured into two creeks in a Bellingham park on June 10, 1999, exploding into a fireball that fatally burned two 10-year-old boys, Wade King and Stephen Tsiorvas. Liam Wood, 18, who was fishing in the area, was overcome by fumes and drowned.

The plea deal calls for the companies to pay civil penalties to settle a separate lawsuit brought in May by the Justice Department's Environmental and Natural Resources division, the sources said. That suit sought up to $37.2 million from Olympic and Shell.

Both companies also have agreed to settle $8.7 million in civil penalties levied by the Washington state Ecology Department, the sources said.

In April, Olympic, Shell and other parties agreed to pay $75 million to settle wrongful-death suits brought by the families of the two boys. They also reached an undisclosed settlement with Wood's family.

But both companies still face a lawsuit seeking at least $450 million, brought by Arco over an interruption of business caused by the rupture and temporary shutdown of the pipeline.

And Olympic, now run by BP Pipelines North America, has sued Shell, claiming Shell was the operator of the pipeline at the time of the rupture. Olympic is trying to get Shell to pay tens of millions of dollars in spill-related costs.

How the plea deal might affect those suits is unclear.

Steve Miletich: 206-464-3302 or smiletich@seattletimes.com.

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