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Trial ends over how much BP should pay for Gulf oil spill

NEW ORLEANSBP-logo — The latest phase of a trial to determine how much BP should pay in Clean Water Act penalties for the 2010 Gulf of Mexico oil spill — which could reach $13.7 billion — ended Monday, but a decision from the judge is not expected for months.

The trial closed after two weeks of testimony and arguments by lawyers for the Justice Department, which wants a high penalty, and BP, which wants a lower figure. Anadarko Petroleum Corp., a minority owner of the ill-fated well, was also part of the proceeding and is fighting the government’s push for more than $1 billion in penalties.

Attorneys may file briefs in the case as late as April and it remains unclear how soon after that U.S. District Judge Carl Barbier will rule.

It was the third phase of a trial to determine Clean Water Act penalties arising from the April 20, 2010, explosion of the Deepwater Horizon rig at BP’s Macondo well. The blast killed 11 workers and sent oil spewing into the Gulf for 87 days.

Barbier has already issued key rulings after two earlier phases: that BP acted with “gross negligence” in the disaster, a decision BP is appealing; and that 3.19 million barrels of oil were discharged. Those two factors could lead to a maximum $13.7 billion fine based on a per-barrel penalty.

BP argued against a heavy penalty. It said its response to the spill and cleanup effort were robust, that the economy and environment of the Gulf has recovered strongly and that it already has run up $42 billion in costs including the cleanup, response, settlements with victims and criminal penalties.

Also, BP attorneys argued an excessive penalty would be too much of an economic hardship on BP Exploration and Production, the BP entity deemed responsible for the spill.

Government attorneys say a higher-end penalty is called for, given the economic and environmental harm caused by the spill, and they cast doubts about the effect of a high fine on BP Exploration and Production and other BP entities.

Anadarko attorneys kept a low profile throughout the trial, until Monday, when they focused on the fact that Anadarko was not involved in operations on the Deepwater Horizon rig.

They said a stiff Clean Water Act penalty would have unintended consequences: giving investors who don’t have a hands-on operating role in a venture an incentive to interfere with operators’ safety decisions. They called Kenneth Arnold, an engineer and oil industry safety expert, who testified that forcing non-operators on a well project into a role where they contribute to safety decisions can lead to confused roles and unsafe practices.

Anadarko’s first witness, Darrell Hollek, a vice president for the corporation, said Anadarko offered BP firefighting assistance and experts for numerous aspects of the response to the 2010 disaster.

Under cross-examination by a government attorney, he acknowledged that Anadarko never paid directly for response or cleanup costs.

His testimony at times touched on a $4 billion payment Anadarko made to BP to settle a dispute after the spill, something Anadarko argues the judge should consider when deciding Anadarko’s penalty.

The dispute arose from the BP operating agreement with Anadarko. Hollek said BP wanted reimbursement of $6 billion in spill expenses, but Anadarko said the reimbursement was not called for under the operating agreement because of BP’s “gross negligence” in the disaster. The settlement called for a $4 billion payment by Anadarko to BP, with a condition that the money go to aid victims of the explosion and spill.

 

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