News Column

Sides Posture Before BP Oil Spill Liability Trail

Feb. 23, 2013

Michael Donhauser, dpa

London (dpa) - The bill for the Deepwater Horizon oil rig explosion and spill already has reached $38 billion, but British Petroleum (BP) still faces the possibility of more costs associated with the disaster.

A portion of those will be determined in a trial set to open Monday in New Orleans to determine liability for the spill in the Gulf of Mexico nearly three years ago.

When BP and thousands of private plaintiffs settled on a compensation package nearly a year ago in New Orleans, there was a great deal of interest from media and lawyers. This time BP faces the US government, which is seeking billions of dollars in fines.

The disaster killed 11 workers when the oil rig exploded and uncorked a well that leaked hundreds of thousands of barrels of oil into the gulf. BP management is prepared to pay $5 billion for violating the Clean Water Act, far below what the US is seeking.

BP has responded bluntly to what it views as "excessive demands" made by the Justice Department.

"We have always been open to settlements on reasonable terms," Rupert Bondy, BP's lead lawyer, said Tuesday. "Faced with demands that are excessive and not based on reality of the merits of the case, we are going to trial."

The trial will deal with one relevant term during what is expected to be months of legal haggling: gross negligence.

If it can be determined that BP acted with gross negligence, then it would be required by law to pay up to $4,300 per barrel of crude oil leaked.

"Gross negligence is a very high bar that BP believes cannot be met in this case," Bondy said. "This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent."

If gross negligence cannot be proved, the fine would be less than $2,000 per barrel.

There is also a dispute over the amount of oil that leaked from the well during the 87 days before it was capped.

The government put the amount at about 4.9 million barrels - each barrel holding 159 litres. BP says that amount is exaggerated by at least 20 per cent. Bondy said the amount is no more than 3.1 million barrels.

BP won approval Tuesday for an agreement saying the government will not count 810,000 barrels of oil captured before they became part of spill. That reduced the maximum fine under the Clean Water Act from about $21 billion to about $17.6 billion.

According to BP, it has pledged to pay $38 billion in compensation for the largest oil spill in US history, with $23 billion already paid out. The criminal liability portion is $4.5 billion after BP pleaded guilty to manslaughter.

Private plaintiffs and business people will receive $7.8 billion for losses. The largest portion goes to fisheries.

The rig's owner, Transocean, has settled with the government on pollution claims and will pay $1.4 billion, including $400 million in criminal penalties. In November, BP reached a settlement with the Justice Department on all criminal charges.

BP has calculated that its costs for the spill thus far are $42 billion. The company also has suffered massive economic consequences since the accident.

Tony Hayward resigned as chief executive over his poor handling of the crisis. He was replaced by American Bob Dudley, who reformed the company's security concept and put parts of the company valued at $30 billion up for sale to finance the costs of the disaster.

BP's stock has slowly slipped into losing territory. Last year alone it had to write off $5 billion.

Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters