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Even after $4.5-billion oil spill fines, civil trial looms for BP

November 16, 2012|By Michael Muskal and Richard Simon
  • The Deepwater Horizon oil spill left beaches needing a major cleanup.
The Deepwater Horizon oil spill left beaches needing a major cleanup. (Joe Raedle/Getty Images )

WASHINGTON -- BP has accepted criminal responsibility for the massive oil spill in the Gulf of Mexico, a move that it said has put the criminal part of one of the nation’s worst environmental disasters in the rear-view mirror.

Even if that is true, and the government has insisted that its criminal probe is ongoing, BP’s troubles are far from over. On the horizon is a civil case that could cost the company billions of dollars more, as well as continuing concerns by lawmakers about how to safeguard the nation’s environment and regulate a key industry.

The criminal settlement is a “significant first step in the right direction,’’  Rep. Charles W. Boustany Jr. (R-La.) said. “Some of the biggest liabilities – particularly the penalty that could come out of the Clean Water Act – are still facing the company.”

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“There is still a considerable amount of restitution to be made by BP,” agreed Sen. Roger Wicker (R-Miss.). “We now look forward to the maximum civil penalties being assessed ...They go a long way to making us economically whole following this oil spill.”

The fire and explosion that took place on the Deepwater Horizon drilling rig in April 2010 changed the course of development in the Gulf region. The incident killed 11 people on the rig and opened up an underwater well that spewed oil into Gulf waters for almost three months before the Macondo well was finally capped.

In all, more than 200 million gallons of oil went into the water and much washed ashore along beaches in five states, threatening the environment and harming the key commercial fishing and tourism industries.

BP, which has paid billions of dollars to clean up the environment and billions more to compensate those who were harmed, has repeatedly apologized for the disaster. It did so again on Thursday when the settlement was announced.

“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,” Bob Dudley, BP’s group chief executive, said in a statement. “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.”

Under Thursday’s agreement, BP entered guilty pleas to 11 counts of manslaughter in connection with the deaths on the Deepwater Horizon, in effect admitting that the company’s employees were negligent in misreading a safety test. The company also pleaded guilty to one felony count of obstruction of Congress in connection with false information BP gave during the early days of the spill about the rate at which oil was flowing from the well.

BP agreed to pay more than $4.5 billion in fines to the government, including a $525-million civil penalty to the Securities and Exchange Commission. The package is a record for this type of case involving criminality by a company.

While the amount of the fine is large, it is well within the company’s reach. BP recently reported a 40% rise in underlying earnings to $5.2 billion for the third quarter of 2012 and raised its quarterly dividend by 12.5%.

Environmental groups question whether the penalties are enough.

“This settlement is an important step in holding BP accountable and it’s especially significant that BP is pleading guilty to felonies,” stated Frances Beinecke, president of the Natural Resources Defense Council and who served on the National Oil Spill Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

“What’s needed next is a sizable civil penalty to begin to address the damage that has been done to Gulf communities. We also need action by Congress and continued vigilance by the administration to make sure something like this does not happen again,” she said.

The business and environmental communities are looking ahead to February when the next phase, the civil trial under the Clean Water Act, is scheduled to begin.

In its statement on Thursday, BP acknowledged that the current agreement covers only criminal matters and the civil portion still lies ahead. It insists it did not behave in a grossly negligent manner.

"Grossly negligent" is the key term in the proceeding and is a standard on which courts have widely disagreed. Depending on the court ruling, BP could face fines, ranging from $1,100 to $4,300 per barrel of oil spilled. That works out to $5 billion to $21 billion.

“We’re looking forward to the trial” in which “we intend to prove that BP was grossly negligent in causing the oil spill,” U.S. Atty. Gen. Eric H. Holder Jr. said at a news conference on Thursday.

BP has been negotiating for a settlement on the civil side, but it has proven to be elusive. Holder said Thursday that negotiations continue, but “we have not reached a number that we considered satisfactory.”

Part of the problem is how to divide the civil settlement among the five states that were harmed by the spill. Still, a settlement that would avoid the trial remains a possibility.

In the wake of the 2010 spill, the Obama administration overhauled the regulatory agency that leased drilling rights in the Gulf of Mexico, approved drilling plans and monitored safety offshore. The agency has since been split so those functions are separated. There was also a six-month moratorium on deep water drilling.  For some in Congress, there is more to be done.

“The Obama administration has taken important steps to increase safety standards for blowout preventers, well design and construction in offshore drilling,” said Rep. Edward J. Markey (D-Mass.), the top Democrat on the House Natural Resources Committee, on Friday. 

“Congress still needs to pass legislation that codifies the actions taken by the Obama administration, increases penalties and liabilities for companies that spill, and ensures that the agencies charged with overseeing offshore oil drilling have the resources they need to protect workers and the environment,” Markey said.

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