BP plc, one of the largest producers in North America, agreed Thursday to pay more than $4.5 billion in fines to the federal government to settle criminal claims related to the Macondo well blowout in April 2010, which destroyed the Deepwater Horizon platform and killed 11 men.
The charges were filed against subsidiary BP Exploration and Production Inc. The producer agreed to plead guilty to 11 felony counts of misconduct or neglect of ships' officers relating to the deaths of the 11 men on the drilling rig, which caught fire and sank when Macondo blew out. It also will plead guilty to one misdemeanor count under the Clean Water Act (CWA); one misdemeanor count under the Migratory Bird Treaty Act; and one felony count of obstruction of Congress.
Thirteen of the 14 criminal charges pertain to the accident itself and are based on the "negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon," BP said. "BP acknowledged this misinterpretation more than two years ago when it released its internal investigation report" (see NGI, Sept. 13, 2010).
The Department of Justice's (DOJ) Deepwater Horizon Task Force, which filed the plea agreement, also unsealed a 23-count indictment charging BP's two highest-ranking supervisors onboard the Deepwater Horizon with manslaughter and violation of the CWA. The indictment charges the two BP well site leaders with negligence and gross negligence, on the evening of April 20, 2010, when the well blew.
A separate indictment charges former BP executive David Rainey with obstructing a congressional investigation and making false statements to law enforcement officials. The indictment alleges that Rainey, on behalf of BP, "intentionally underestimated the amount of oil flowing from the Macondo well. Rainey allegedly cherry-picked pages from documents, withheld other documents altogether and lied to Congress and others in order to make the spill appear less catastrophic than it was."
"Make no mistake: While the company is guilty, individuals committed these crimes," said DOJ U.S. Assistant Attorney General Lanny A. Breuer at a press conference in New Orleans. "In the face of glaring red flags indicating that the well was not secure, both men allegedly failed to take appropriate action to prevent the blowout.
"Perhaps the greatest tragedy is that the deaths of the 11 men onboard the Deepwater Horizon could have been avoided. The explosion of the rig was a disaster that resulted from BP's culture of privileging profit over prudence; and we allege that BP's most senior decision makers onboard the Deepwater Horizon negligently caused the explosion."
Federal officials hope that BP's acknowledgement of its misconduct "brings some measure of justice to the family members of the people who died onboard the rig," Breuer said.
"As the oil spill continued, BP made a tragic situation worse: it began misleading Congress and the American people about how much oil was pouring out of the Macondo well," he said. "As BP now admits, in responding to Congress, the company lied and withheld documents, in order to make it seem as though less damage was being done to the environment than was actually occurring. Acknowledging those lies, BP has agreed to plead guilty to felony obstruction of Congress.
Companies convicted of some criminal acts may, under U.S. law, be barred from contracting with the federal government. However, BP said it has not been advised of "the intention of any federal agency to suspend or debar" in connection with the plea agreement.
Thursday's agreement "is consistent with BP's position in the ongoing civil litigation that this was an accident resulting from multiple causes, involving multiple parties, as found by other official investigations," the company said. The remaining criminal count "pertains to two BP communications made to a member of Congress during the spill response about flow rate estimates."
Under the agreements, which require court approval, DOJ is to receive $4.5 billion over five years, while the Securities and Exchange Commission (SEC) would receive $525 million over three years. The DOJ settlement requires BP to pay a total of $2.394 billion to the National Fish & Wildlife Foundation and $350 million to the National Academy of Sciences for five years. The SEC settlement claims were premised on oil flow rate estimates that were in three reports BP provided to the commission in 2010 on April 29, 30 and May 4, which was within the first 14 days following the incident.
As part of its plea, BP agreed to "further enhance the safety of drilling operations in the Gulf of Mexico. These requirements relate to BP's risk management processes, such as third-party auditing and verification, training, and well control equipment and processes such as blowout preventers and cementing. In addition, BP has agreed to several initiatives with academia and regulators to develop new technologies related to deepwater drilling safety."
Two monitors are to be appointed for four years, according to the settlement. A process safety monitor would review, evaluate and provide recommendations to improve BP's process safety and risk management procedures concerning deepwater drilling in the GOM. An ethics monitor would review and recommend improvements to the company's code of conduct, as well as its implementation and enforcement.
"All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region," said BP Group CEO Bob Dudley. "From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. We apologize for our role in the accident, and as today's resolution with the U.S. government further reflects, we have accepted responsibility for our actions."
BP Chairman Carl-Henric Svanberg said management believes "resolution is in the best interest of BP and its shareholders. It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims."
Closing the chapter on federal criminal claims, pending court approval, doesn't end the story. And DOJ has not closed its case against BP, Breuer said. "In the months to come, the Deepwater Horizon Task Force will continue its tireless pursuit of justice in this matter." The criminal settlements do not include federal civil claims, including potentially more CWA violations that range from $1,100 to $4,300 per barrel of oil spilled, which means BP could be fined as much as $20 billion or more if its actions were found to be grossly negligent.
BP, which said it is "prepared to vigorously defend itself against remaining civil claims," plans to increase its existing $38.1 million charge against earnings for the spill by $3.85 billion.
The producer in May won preliminary approval with the U.S. District Court, Eastern District of Louisiana in New Orleans, for a landmark $7.8 billion settlement to resolve more than 100,000 court claims in a proposed accord with the Plaintiff's Steering Committee (see NGI, May 7). That settlement, which now is under final court review, would be paid from $20 billion Gulf Coast oil spill compensation trust fund set up in 2010. BP is making the final $860 million payment to the trust in this quarter. To date, BP has paid about $14.1 billion in spill response and clean-up costs to federal officials.
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