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BP Facing $13.7B Macondo Penalty, But Response Efforts Not Reckless, Says Judge
BP plc is facing up to $13.7 billion in penalties for violations of the Clean Water Act (CWA) for the Macondo well blowout in 2010, but the maximum fine is billions less than some had predicted.
After reviewing phase two of the three-part multidistrict litigation, which concerned BP’s source control efforts following the blowout, U.S. District Court Judge Carl Barbier in New Orleans decided on a middle ground to estimate how much oil was spilled over a nearly four-month period (In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, No. 10-2771). The well blowout and related explosion killed 11 men and destroyed Transocean Ltd.’s Deepwater Horizon drilling rig.
Barbier ruled that the blown well released an estimated 4.0 million bbl total into the Gulf of Mexico (GOM). BP had estimated that a total of 3.26 million bbl was discharged, while the federal government had contended that 4.09 million bbl was released. After deducting 810,000 bbl that was estimated to have been collected during the cleanup, Barbier said an estimated 3.19 million bbl had been released.
The judge in September had determined following phase one of the trial that BP was “grossly negligent” before the blowout, which meant that the maximum possible civil penalty under the CWA was $4,300/bbl. With the new ruling, BP’s penalties could be as much as $13.7 billion maximum, versus federal estimates of up to $18 billion. The court has discretion to set a lower fine. Fines are to be assigned following phase three, the penalty phase, which is scheduled to begin this month.
Although Barbier had ruled that BP was grossly negligent for its actions before the blowout, he determined Thursday in the 44-page ruling that its response efforts following the blowout were not.
“BP was not grossly negligent, reckless, willful or wanton in its source control planning and preparation,” Barbier wrote. “Assuming without deciding that BP’s source control plan was negligent, that finding would not alter any of the fault determinations from phase one,” on which he ruled last September (see Daily GPI, Sept. 4, 2014).
“It has not been shown that BP’s flow rate misrepresentations delayed the capping of the well or otherwise adversely affected source control. It has not been shown that the post-blowout source control decisions or actions were unreasonable. In short, nothing from the source control segment alters the court’s findings and conclusions from phase one.”
Following the ruling, a BP spokesman said the court during the penalty proceedings is required to consider the application of eight statutory factors. They are:
“BP believes that considering all the statutory penalty factors together weighs in favor of a penalty at the lower end of the statutory range,” the spokesman said. Counsel is reviewing the court’s decision to decide on an future steps.
BP already has set aside more than $42 billion for cleanup, compensation and fines. In part to help pay for compensation and litigation, BP has sold close to $40 billion of global assets since the spill, about 20% of its former earnings power.
Barbier’s ruling is not the last chapter. Once the MDL cases are completed, BP faces other penalties following a Natural Resources Damage Assessment, which may require the London-based major to fund additional environmental restoration efforts.
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