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BP hopes to lessen potential $13.7 billion spill penalty

NEW ORLEANS

The 2010 Deepwater Horizon oil rig explosion triggered a massive oil spill that the Gulf Coast is still financially recovering from.

The 2010 Deepwater Horizon oil rig explosion triggered a massive oil spill that the Gulf Coast is still financially recovering from.

— Lawyers for the government and oil giant BP head to federal court Tuesday for a trial in that could add more than $13 billion in penalties to the billions BP already has shelled out as a result of 2010 Gulf oil spill.

Federal lawyers say BP should pay Clean Water Act penalties as high as $4,300 per barrel spilled after the Deepwater Horizon rig explosion at BP’s Macondo well. Based on a court finding that 3.19 barrels polluted the Gulf, the penalties could reach $13.7 billion.

BP will argue for a lower figure, although it hasn’t stated a specific dollar amount. It says its costs already have hit $42 billion, including a $14 billion response and cleanup. Its pre-trial briefs say a low-end penalty would accomplish the Clean Water Act’s purposes: deterring environmentally dangerous behavior and encouraging effective responses.

The trial in the courtroom of U.S. District Judge Carl Barbier is expected to last three weeks. A ruling isn’t expected until April at the earliest and, barring a settlement, appeals are likely.

As a result of two earlier trials, Barbier has already ruled that BP Exploration and Production Inc., an affiliate of BP PLC, acted with “gross negligence” in the 2010 explosion of the Deepwater Horizon rig at the Macondo well site.

BP is appealing that finding, which will be one factor in determining the penalty. Barbier also determined, in a ruling handed down Thursday, that 3.19 million barrels — just under 134 million gallons — were discharged, roughly midway between BP’s estimate of around 2.45 million barrels and the government’s figure of 4.2 million. (The higher figure would have meant potential penalties of around $18 billion.)

At issue in the new trial is how much BP should be penalized per barrel. Federal lawyers argue that the law in a matter of gross negligence sets a maximum penalty of $4,300 per barrel and that BP should be forced to pay the maximum, which would result in the $13.7 billion penalty.

Barbier will hear arguments on eight factors that, by law, must be considered in his decision. Among them: the seriousness of the violation, the effect of the penalty on the economic health of BP, the effectiveness of BP’s cleanup efforts and BP’s past environmental violations.

“If ever there was a case that merits the statutory maximum, this is it,” the government’s pretrial brief states.

BP will argue that, in the words of its pre-trial briefs, its cleanup response was “extraordinarily effective” and that its efforts to mitigate spill damage “extraordinarily effective.” BP attorneys also argue that a high-end fine would also have too severe an economic impact on a business already weakened by the $42 billion in Macondo-related liabilities it already faces — a problem exacerbated, the briefs note, in light of the falling price of oil.

Both sides will call experts who will testify on the overall environmental effects of the spill.

“Based upon the government’s own data, and data collected by BPXP and academics, the harm caused by the spill was far less than many feared,” BP states.

The government, meanwhile, previews its own experts on human health, the economy and the environment.

“These experts will refute BP’s claim that there has been a full recovery with no future risks and will document extremely serious harms to the physical and human environment – all of which clearly refute BP’s argument for a downward departure from the maximum penalty,” the government states.

The Deepwater Horizon rig exploded April 20, 2010, killing 11 workers and sending oil spewing into the Gulf for 87 days.

 

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