In its efforts to stop the financial hemorrhaging brought about the 2010 Deepwater Horizon oil spill, BP voiced strong objections to the billions of dollars in damages sought by the Gulf States and a number of municipalities harmed by the disaster.
Alabama, Florida, Louisiana, and Mississippi are suing BP for economic and property damages under the Oil Pollution Act. For disclosure purposes in releasing the company’s financial results on Tuesday, BP calculated the states’ combined claims, arriving at a total of $34 billion.
The states’ claims aren’t included in the $42.2 billion BP provisioned for in estimating the total cost of the oil spill, which flooded the Gulf of Mexico with 206 million gallons of oil and is considered the biggest environmental disaster in U.S. history.
An inability to settle state claims soon could complicate a civil trial set to start February 25 in New Orleans. The first part of the trial will determine in percentages the liability shared by BP and its partners for causing the deadly Macondo well blowout and resulting spill. Civil fines for violating the Clean Water Act could cost anywhere between $5 and $20 billon.
Analysts told Reuters that it appeared BP and the federal government would not be able to settle the civil claims before February 25. “We’ve said we would settle but it would have to be on reasonable terms,” BP Chief Bob Dudley told Bloomberg. “Our team is very prepared; we’re assuming the trial will go ahead.”
As for the states’ claims, BP said the methods used to arrive at $34 billion in claims were “seriously flawed,” and “not supported by the legislation (Oil Pollution Act).” To make its point, BP says the Gulf states are suing in part for lost tax revenues generated by spill-related job losses, blows to the fishing industry, and declines in tourism, retail, and other economic sectors. However, according to BP, the oil spill actually created some 40,000 clean-up and other spill-related jobs, which would have created a tax increase.
Garret Graves, senior coastal adviser to Louisiana Governor Bobby Jindal, told Reuters that the $34 billion in state claims should send a clear message to BP:
“Perhaps this helps BP to realize the size and scope of the problems they have caused the citizens of the Gulf,” Mr. Graves said. “They have continued to try to downplay the significance the oil spill has had on us,” he added. “BP hasn’t done itself any favors in gaining goodwill with anyone in the Gulf. With a few exceptions early on, they have been incredibly difficult to deal with and their credibility is subsurface.”