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.
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If BP settles, it's almost certain to dwarf previous deals the U.S. has reached with corporate offenders in any industry. That record now stands at $2.3 billion against Pfizer Inc. in 2009 to settle claims over the painkiller Bextra, according to the Justice Department.Skip to next paragraph
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And once the civil case is resolved, depending on the scope of any settlement, BP still could face criminal fines; penalties for violations of oil pollution, clean water and wildlife protection laws; and still-pending economic losses due to the partial shutdown of the Gulf. Morgan Stanley analysts estimated criminal fines would come in between $5 billion and $15 billion in any eventual settlement.
Robert Wiygul, an environmental lawyer in New Orleans who represents spill plaintiffs but is not involved in the settlement talks, said putting a dollar figure on what is the right sum for BP to pay is extremely difficult.
"There is going to be a lot of voodoo there," he said.
The bill will be commensurate to the magnitude of the disaster: An epic engineering failure that highlighted the dangers of drilling in extreme conditions miles from shore and miles under water.
The April 20, 2010, blowout of BP's deepwater Macondo well killed 11 workers and injured 17. The burning drilling rig Deepwater Horizon toppled and sank to the Gulf floor, where it sits today.
It took engineers 85 days to permanently cap the well. By then, more than 200 million gallons of oil had leaked from the well and covered much of the northern half of the Gulf of Mexico – endangering fisheries, killing marine life and shutting down offshore oil drilling operations.
About 900 miles of shoreline were fouled and beaches were closed for months. The spill forced President Barack Obama in June 2010 to make his first Oval Office speech, in which he called the BP spill "the worst environmental disaster the nation has ever faced."
Under the Clean Water Act, which is designed to punish companies and prevent future spills, a polluter pays a minimum of $1,100 per barrel of spilled oil; the fines nearly quadruple for companies found guilty of grossly negligent behavior. Under this statute, BP could owe $5 billion to $21 billion. Transocean and Anadarko Petroleum Corp., a minority owner of the Macondo well, also face paying hefty fines.
One of the biggest questions facing U.S. District Judge Carl Barbier, a maritime law expert presiding over the trial, will be to determine if BP was guilty of gross negligence.
Under the Oil Pollution Act, companies must pay to restore what they fouled. Based on criteria from what Exxon paid after the 1989 Exxon Valdez spill, BP could pay about $31 billion, or $148 per gallon, to cover the ecosystem damage to the Gulf. Exxon paid $900 million for 11 million gallons of spilled oil, or about $81 per gallon. Adjusted for inflation, that's $148 per gallon.
Experts said Barbier will weigh a number of factors in determining what BP should pay to restore damaged natural resources, and BP's liability under the Oil Pollution Act could be much higher or much lower than what Exxon paid per gallon.