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BP faces billions in fines as spill trial nears

The huge legal bill for the catastrophic 2010 oil spill in the Gulf of Mexico is coming due for BP as a federal trial opens Monday to determine the company’s liability for the blowout of its Macondo well.

By Cain BurdeauAssociated Press / February 25, 2012

In this April 2010 photo, fire boat response crews spray water on the burning remnants of BP's Deepwater Horizon offshore oil rig. The gargantuan legal bill for the catastrophic oil spill in the Gulf of Mexico is coming due for BP as a federal trial opens Monday to determine the company’s liability for the blowout of its Macondo well.

US Coast Guard/AP

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New Orleans

On the cusp of a trial over the catastrophic 2010 oil spill in the Gulf of Mexico, phalanxes of lawyers, executives and public officials have spent the waning days in settlement talks. Holed up in small groups inside law offices, war rooms and hotel suites in New Orleans and Washington, they are trying to put a number on what BP and its partners in the doomed Macondo well project should pay to make up for the worst offshore spill in U.S. history.

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It is a complex equation, and the answer is proving elusive.

The federal government, Gulf states, plaintiffs' attorneys, BP PLC, rig owner Transocean Ltd. and cementer Halliburton Energy Services Inc. have been in simultaneous and separate negotiations in New Orleans, according to a person with direct knowledge of the talks and others who had been briefed on them.

IN PICTURES: Destructive Oil Spills

Trial is set for Monday, and by Friday, no deal had been reached, several people familiar with the negotiations told The Associated Press on condition of anonymity. The biggest stumbling block appeared to be the sheer size and sprawling uncertainty over the unprecedented dollar amounts at stake.

Financial analysts estimate BP's potential settlement payout at $15 billion to roughly $30 billion. The company itself estimated it would cost about $41 billion in the weeks after the explosion to account for all of its costs, including cleanup, compensating businesses, and paying fines and ecological damage.

"This one is off the charts in terms of size and significance," said Eric Schaeffer, the director of the Environmental Integrity Project in Washington and former head of the Environmental Protection Agency's Office of Regulatory Enforcement.

BP has to weigh its chances of getting off cheaper by piecing together a sweeping settlement or put its fate in the hands of one man, a federal judge who will hear testimony in lieu of a jury. If the judge sides with plaintiffs on the amount of oil spilled and determines BP was grossly negligent, the company conceivably could face up to $52 billion in environmental fines and compensation alone, according to an AP analysis.

While such a scenario is unlikely, it illustrates the broad range and staggering sums at play.

No matter what, the case is all but guaranteed to set records as the most expensive environmental disaster in history, far surpassing the Exxon Valdez disaster in Alaska in 1989. Exxon ultimately settled with the U.S. government for $1 billion, which would be about $1.8 billion today.

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