BP Agrees to $4.5 Billion in Penalties Over Gulf Spill

16 Nov 2012

Views: 2,003

Font Size: a / A

up1511212-BP-oil-spill.jpg - up1511212-BP-oil-spill.jpg

 BP oil spill


BP Plc (BP/), which has now agreed to pay more than $12 billion in government and private party settlements over the 2010 Gulf of Mexico oil spill, still faces claims seeking billions of dollars more for the catastrophe.

The $4.5 billion agreement Thursday  resolving federal criminal charges and claims by the Securities and Exchange Commission left the company at risk for as much as $17.6 billion in potential fines from alleged violations of the Clean Water Act and demands by the U.S. and Gulf states for enough money to restore the region’s coastline and waters to their condition before the spill.

Europe’s second-biggest oil company will face resistance from both state and federal authorities in trying to resolve the remaining pollution violations and natural resource damages claims, said Garret Graves, chairman of Louisiana’s Coastal Protection and Restoration Authority. Both sets of claims will “easily be in the tens of billions of dollars,” Graves said in a phone interview.

Still, BP may escape a federal contracting ban as it tries to rebuild its reputation. The company, the Pentagon’s biggest fuel supplier with awards valued at about $1.35 billion in 2011, said it hasn’t been informed about a so-called contracting death sentence.

‘Down Payment’
BP’s criminal settlement with the Justice Department announced Thursday “represents but a down payment on the oil company’s obligation to mitigate the environmental and economic damage it unleashed on the Gulf Coast more than two years ago,” said Alabama Representative Jo Bonner, a Republican.

Bonner said in a statement that U.S. Attorney General Eric Holder called him before the settlement was announced and “gave his assurances that the Justice Department would vigorously pursue further civil penalties under the Clean Water Act.”
“Anything less would be unacceptable to our coastal communities,” Bonner said.

The U.S. has been in negotiations with BP to resolve all disputes over the spill, including civil claims brought by the government in a 2010 lawsuit alleging violations of federal pollution laws, Holder said at a news conference yesterday in New Orleans.

“We have not reached a number that I consider satisfactory,” Holder said. The pollution claims are scheduled to be heard in a non-jury trial set to begin Feb. 25 in federal court in New Orleans.

State Disagreements
Disagreements among state officials and other parties provided a stumbling block to reaching a global resolution of all government claims, said a person familiar with the negotiations. The states disagreed over which laws would govern the payments, which would affect the amounts paid and how much control local officials would have over the funds, said the person, who asked not to be identified because the talks were private.

The $4.5 billion settlement announced yesterday ended all criminal charges against BP over the spill and settled the Securities and Exchange Commission’s claim that the company misled investors about the rate of oil flowing into the Gulf of Mexico.

BP agreed to plead guilty to 14 criminal counts including 11 for felony manslaughter for the 11 people who died when the Deepwater Horizon drilling rig exploded and sank, the U.S. said. The company has also pleaded guilty to one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act and one felony count of obstruction of Congress, the U.S. said.

Manslaughter Charges
The U.S. also charged two BP well-site managers with involuntary manslaughter and a former executive with obstruction and false statements. Lawyers for all three men said their clients were innocent.

Arraignments for all three are set for Nov. 28 in federal court in New Orleans. BP is scheduled for a separate arraignment on Nov. 27 in the same court.

“Perhaps the greatest tragedy is the BP disaster could have been avoided,” Assistant Attorney General Lanny A. Breuer said yesterday in New Orleans. “We hope this settlement brings some measure of justice to the families of the workers who died on the rig.”
BP also underestimated the size of the spill to the public and Congress to make it seem as if “less damage was being done to the environment than in fact was really occurring,” Breuer said.

‘Accepted Responsibility’
“All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf Coast region,” BP Chief Executive Officer Bob Dudley said yesterday in a statement. “We apologize for our role in the accident, and as today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”

The $4 billion settlement with the U.S. Justice Department includes a record $1.26 billion criminal fine, to be paid over five years. London-based BP said in a statement that it agreed to five years’ probation and will pay $525 million to settle the SEC claims.
The $525 million “will be used to compensate harmed investors for losses sustained from this fraud,” Rob Khuzami, director of enforcement at the SEC, said at the news conference in New Orleans.

Shareholder Lawsuits
The SEC agreement doesn’t resolve shareholder lawsuits brought in federal court in Houston that also allege the company understated the extent of the spill. The investors, who are seeking to be allowed to sue BP in a class, or group, action, say the company downplayed the size of the spill to bolster share prices.

The guilty plea “supports our claims,” said attorney Steven Toll, who represents BP investors in the lawsuit. “It will be helpful in the long run.”

The April 2010 Macondo well blowout and the explosion that set off the worst offshore oil spill in U.S. history. The accident prompted hundreds of lawsuits against BP; Transocean Ltd. (RIG), the Vernier, Switzerland-based owner and operator of the Deepwater Horizon rig; and Halliburton Co. (HAL), which provided cementing services.

The Justice Department sued BP in December 2010, alleging the company failed to prevent or contain the spill and seeking fines for each barrel of oil discharged.

Water Act
The government estimated that more than 4 million barrels of oil were spilled. If BP is found to be grossly negligent, a legal standard the government would have to prove showing the accident resulted from a conscious BP act or omission, it could be fined as much as much as $4,300 a barrel under the Clean Water Act.

BP set aside $3.5 billion to pay potential Clean Water Act fines, using its own estimate of 3.2 million barrels and a maximum fine of $1,100 per barrel without gross negligence.

BP faces a maximum possible fine of $17.6 billion for civil environmental violations alone if the company is found grossly negligent by the federal judge overseeing lawsuits stemming from the spill.

BP reached a settlement with most non-government plaintiffs in March, agreeing to pay an estimated $7.8 billion. That settlement averted a trial scheduled to determine liability for the disaster.

Tags: Business, World, BP oil spill

Comments: 0


Add your comment

Please leave your comment below. Your name will appear next to your comment. We'll also keep you updated by email whenever someone else comments on this page. Your comment will appear on this page once it has been approved by a moderator.

comments powered by Disqus