Monday, November 19, 2012

The Costs of Oil: BP Liable for up to 90 Billion

BP has been ordered to pay an unprecedented 4.5 billion in fines as the costs of their 2010 oil fiasco in the Gulf of Mexico continue to mount. On Thursday November 15, 2012, BP pleaded guilty to 14 felony counts related to the explosion and subsequent oil spill at the site of its Deepwater Horizon oil rig. The plea agreement with federal prosecutors includes charges of manslaughter for the 11 workers who were killed and one felony count for obstruction of justice for false statements made to Congress about the amount of oil leaking from the out-of-control well.

The breakdown of the 4.5 billion in fines is as follows:

  • $2.4 billion for is to be paid to the National Fish and Wildlife Foundation for environmental restoration, preservation, and conservation efforts throughout the affected area
  • $1.3 billion in criminal fines, which the company would pay out in installments over five years
  • $350 million is to be paid to the National Academy of Sciences over five years
  • $525 million civil penalty satisfies a Securities and Exchange Commission charge that BP had obstructed Congress by lying to Congress about the amount of oil flowing from the well
BP's cleanup efforts have already cost the company nearly $18 billion which are part of $42 billion in pre-tax accounting charges the company has taken. Here is a partial breakdown:
  • 4.5 billion announced on November 15 (the largest corporate criminal penalty in U.S. history)
  • $15 billion that BP has paid so far into a $20 billion trust fund to compensate victims of the spill
  • $7.8 billion settlement for private injury claims from roughly 100,000 fishermen and other business owners in the Gulf region that were affected by the spill
Other civil claims are still pending and they could amount to tens of billions in additional penalties. Potential civil claims under the Clean Water Act allows for fines ranging from $1,100 to $4,300 per barrel (and even higher end if gross negligence is determined) which could amount to additional fines of $20 billion.

These are not the only fines that could be levied, there could also be federal and state sanctions under the Natural Resource Damages Act, and assorted private civil claims, securities claims, or state economic loss claims.

Estimates for the total amount of penalties that BP will ultimately have to pay reach as high as $90 billion. Claims may also be filed against BP's corporate partners including the rig owner Transocean and the well services company Halliburton.

In addition to the fines levied against BP, individuals are also being held accountable. three former BP employees are facing felony charges of manslaughter and obstruction of justice. Two of the three men could face up to 10 years in prison for each of the 11 deaths that resulted form the Deepwater Horizon explosion.

© 2012, Richard Matthews. All rights reserved.

Related Posts
BP's Corporate Irresponsibility
Responsibility for the Costs of the Gulf Oil Spill
The Costs of Offshore Drilling
Managing the Massive Gulf Oil Spill
Offshore Oil is an Avoidable Tragedy
Two More Reasons to Move Beyond Fossil Fuels
The End of Oil and the Next Energy Economy

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