BP pays the $61.2 billion price for 2010 Gulf oil spill
The company is paying record fines. What will they achieve?
BP has put a final price tag on the cleanup and fallout of the 2010 Gulf of Mexico oil spill: $61.2 billion. That figure dwarfs Exxon’s costs following the 1989 Exxon-Valdez spill, which totaled $4.3 billion.
BP had to pay this price following the slew of lawsuits and federal penalties related to the explosion of the Deepwater Horizon rig in April 2010, which killed eleven workers and released 3.2 million barrels of oil into the Gulf of Mexico over almost three months.
In Thursday's announcement, Brian Gilvary, BP chief financial officer, told investors that in estimating all the liabilities stemming from the incident, and reaching the main agreements to settle federal, state, and local government claims, the company was out of financial uncertainty.
What remains to be seen is if the fees and lawsuits achieve what they set out to do: restoring the health of the Gulf and encouraging oil companies to behave more responsibly.
“BP is receiving the punishment it deserves, while also providing critical compensation for the injuries it caused to the environment and the economy of the gulf region. The steep penalty should inspire BP and its peers to take every measure necessary to ensure that nothing like this can ever happen again,” Attorney General Loretta Lynch said when she announced the details of the civil settlement with BP in the fall, one element of the financial fallout BP is facing from the largest offshore oil spill in American history.
The Gulf region suffered severe environmental consequences from the spill. Federal law requires BP to pay to restore the damage to natural resources caused by the spill, which affected more than 1,300 miles of shoreline and many coastal habitats.
The spill required the launch of “the largest environmental restoration program in U.S history, totaling more than $20 billion for Gulf Coast recovery and restoration,” according to Fred Krupp, president of Environmental Defense Fund.
Coastal Louisiana and the wetlands around the Mississippi River Delta – which were already eroding at an alarming rate before the spill – received the brunt of the oil that hit the coast. Some marshes and barrier islands still have remnants of BP oil, even six years later. More than 1,400 dead dolphins and whales have washed up on the Gulf's shores since the disaster, far more than the average before the spill.
"The economy of this region has been damaged tremendously," fourth-generation Alabama oysterman Chris Nelson told NPR. "BP has done a lot to bring us back. But again the commitment by both the administration and by BP was to get us back better than we were before. I don't think we're better than we were before."
The spill has also had a dramatic impact on BP, which previously had a reputation as being a leader among oil companies for environmental stewardship.
"Before the accident, BP had a market capitalization of $180 billion. The accident actually shaved off one-third of the market capitalization of the company. It's a miracle that the company is still in business." Fadel Gheit, oil analyst at Oppenheimer & Co, told The Chicago Tribune.
It is not clear what impact BP’s troubles are having on other companies. Drilling continues in environmentally fragile offshore locations and in some parts of the Arctic. Most oil companies are only cutting back production in these areas because of the collapse in crude oil prices to $45 per barrel. When oil prices rise again, companies may return to risky practices – but there is one new limit.
The federal government released new regulations for offshore oil and gas development in April based on an evaluation of the BP oil spill “designed to improve equipment reliability, especially for blowout preventers and blowout prevention technologies.”