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September 6, 2014

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BP may pay extra US$18b fine for oil spill

BP could be looking at close to US$18 billion in additional fines over the nation’s worst offshore oil spill after a federal judge ruled that the company acted with “gross negligence” in the 2010 Gulf of Mexico disaster.

US District Judge Carl Barbier concluded that the London-based oil giant showed a “conscious disregard of known risks” during the drilling operation and bears most of the responsibility for the blowout that killed 11 rig workers and spewed millions of gallons of oil over three months.

In the next stage of the case, set to begin in January, the judge will decide precisely how much BP must pay.

Under the federal Clean Water Act, a polluter can be forced to pay a maximum of US$1,100 in civil fines per barrel of spilled oil, or up to US$4,300 per barrel if the company is found grossly negligent. Barbier’s finding exposes BP to the much higher amount.

Even as the oil giant vowed to appeal, BP stock fell US$2.82, or nearly 6 percent, to US$44.89, reducing the company’s market value by almost US$9 billion.

“Everybody talks about how big they are, but it’s staggering,” David Uhlmann, a University of Michigan law professor and former chief of the Justice Department’s environmental crimes section, said of the price tag for the spill.

Sale of assets

BP previously agreed to pay a record US$4 billion in criminal fines and penalties over the Deepwater Horizon disaster, plus more than US$27 billion in cleanup costs and compensation to people and businesses harmed by the spill.

The company made US$24 billion in profits last year but could be forced again to sell off some assets to cover the additional fines, analysts said.

Attorney General Eric Holder said Barbier’s ruling “will ensure that the company is held fully accountable for its recklessness” and will “serve as a strong deterrent to anyone tempted to sacrifice safety and the environment in the pursuit of profit.”

Blame apportioned

Barbier held a non-jury trial last year to identify the blowout’s causes and apportion blame for the disaster, and on Thursday he ruled that BP bears 67 percent of the responsibility, Swiss-based drilling rig owner Transocean Ltd 30 percent, and Houston-based cement contractor Halliburton Energy Services 3 percent.

BP made “profit-driven decisions” during the drilling that led to the blowout, the judge said in his 153-page ruling. “These instances of negligence, taken together, evince an extreme deviation from the standard of care and a conscious disregard of known risks,” he wrote.

Among other things, the judge cited a misinterpreted safety test that should have warned the drilling crew that the well was in danger of blowing out.

In a statement, BP said the evidence did not meet the “very high bar” to prove gross negligence.

James Roy and Stephen Herman, who represented oil spill victims in the trial, said: “We hope that today’s judgment will bring some measure of closure to the families of the 11 men who tragically lost their lives, and to the thousands of people and businesses still trying to recover from the spill.”

Government experts estimated 4.2 million barrels, or 176 million gallons, spilled into the Gulf. BP urged the judge to use an estimate of 2.45 million barrels, or nearly 103 million gallons, in calculating any Clean Water Act penalties. Barbier hasn’t ruled yet on how much oil spilled.




 

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