BP readying itself for unprecedented government fines for oil spill

On August 12, the Occupational Safety and Health Administration announced BP finally agreed to pay a record $50.6-million fine for safety violations that led to the 2005 explosion at its Texas City, Texas, refinery that killed 15 workers and injured 170 others. Now, in the wake of its oil disaster in the Gulf of Mexico, BP faces federal fines that will make the Texas City penalties look like pocket change.

According to U.S. law, oil companies must pay penalties of up to $1,100 per barrel of oil accidentally spilled. However, if the oil spill was caused by a company’s gross negligence or willful misconduct, then the Clean Water Act mandates fines of up to $4,300 per barrel.

According to an AP report, the federal government officially estimated the amount of oil spilled by BP to be nearly 172 million gallons. Another credible scientific team comprised of two Columbia University analysts concluded in a peer-reviewed study that the Gulf spill likely released somewhere in the neighborhood of 185 million gallons of crude – a difference of 12.6 million gallons or an entire Exxon Valdez spill’s worth of crude. For now, however, the government is sticking with its own estimate.

“We are already in the stratosphere,” David Uhlmann a University of Michigan law school professor and former chief of the Justice Department’s environmental crimes section, told the AP.

All of the estimates have BP working hard to draw its own analyses, a hint that the oil giant will attempt to drive down the per-gallon penalties it will have to pay to the U.S. government in the future. BP is currently formulating its own estimate of the quantity of oil spilled, and it has already released its own report concluding that Transocean and Halliburton are equally to blame for the catastrophe.

If the federal government finds BP acted negligently or with willful misconduct (and all indications so far point to that conclusion), the company faces a penalty of as much as $21 billion. Those fines would come on top of the $9.5 billion is has spent already on cleanup efforts, whatever billions more it will spend on future cleanup, and $20 billion set aside to help individuals and businesses harmed by the spill.

Whatever the fine is, it will certainly be enormous and unprecedented. Senator Mary Landrieu, D-La., is pushing legislation that would allocate at least 80 percent of the civil and criminal penalties be returned to the Gulf Coast for long-term economic and environmental recovery.