Mea Maxima Culpa For BP
BP has been locked in negotiations with the U.S. government and Gulf Coast states to settle billions of dollars in potential civil and criminal liability claims resulting from the April 20, 2010 explosion aboard the Deepwater Horizon rig.
On November 15th, BP pleaded guilty to all of the 14 counts filed against it: 11 counts of felony manslaughter, one count of felony obstruction of Congress, and violations of the Clean Water and Migratory Bird Treaty Acts. The company agreed to pay over US$4.5 billion in Department of Justice and Securities and Exchange Commission (SEC) penalties.
The settlement and the indictments come two-and-a-half years after the drilling-rig explosion set off the biggest offshore oil spill in U.S. history. The deal, which is subject to approval by a federal judge, includes payments of nearly $2.4 billion to the National Fish and Wildlife Foundation and $350 million to the National Academy of Sciences.
The National Fish & Wildlife Foundation works closely with the U.S. Fish & Wildlife Service on environmental restoration issues involving national parks and refuges, and it is likely that some of that money will be used for restoration projects in Louisiana.
The National Academy, the nation's foremost science organization, conducts studies at the behest of Congress and federal agencies on a wide variety of scientific and engineering topics.
BP will also pay $525 million to settle the SEC's civil charges alleging that BP misled investors about the rate of oil flowing into the Gulf of Mexico during the Deepwater Horizon disaster. BP stated in its SEC filings and elsewhere that the flow rate was estimated to be “up to” 5000 barrels of oil per day, despite evidence that this estimate was unrealistically low.
According to the SEC, a government task force later determined the flow rate estimate was actually more than 10 times higher at 52 700 to 62 200 barrels of oil per day. Despite this, BP never corrected or updated the misrepresentations and omissions it made in SEC filings for investors.
Under the guilty plea, the company also agreed to pay a $1.25 billion criminal fine – the largest criminal penalty in U.S. history.
Despite its seemingly large price tag, the settlement is well within BP's means, considering the oil giant made a record $25.8 billion in profits last year and the fact that and it will be given five years to pay.
The Deepwater Horizon story is far from over. Scientists warn that the spill's full effect on the environment won’t be realized for years to come. Lawsuits have been filed against Transocean Ltd., the rig's owner, and cement contractor Halliburton.
And despite BP’s guilty plea and record fines, the company still faces fines from the Clean Water Act and other federal laws; payouts to thousands of fisheries and businesses hurt by the spill; fines under the Natural Resources Damage Assessment process; and payouts to impacted states, all of which can potentially total more than $40 billion, according to some legal experts. A federal judge in New Orleans, Louisiana, will hear a trial to assess fault in the case in late February 2013.