BP’s oil spill liability trial starts amid reports of $16-billion settlement

BP 435x292 BP’s oil spill liability trial starts amid reports of $16 billion settlementThe trial to determine how much in civil fines BP should pay under the Clean Water Act for polluting the Gulf of Mexico with its 2010 Deepwater Horizon oil spill started in federal court Monday, as lawyers for the company, the federal government, and four Gulf states continued with their efforts to reach an agreement out of court.

According to the New York Times, lawyers briefed on the settlement talks said that a $16 billion payout to settle the claims has been proposed, with one big caveat: BP wants to pay mostly penalties instead of fines, a technicality that would save the oil giant billions of dollars.

As the New York Times explains, BP wants this option “because penalty payments, like those that cover damages to natural resources, are tax-deductible, while payments for fines, like those for the Clean Water Act, are not.” While American taxpayers wouldn’t pay to restore the Gulf out of pocket, such an agreement could ultimately shift the burden of the agreement to the taxpayers in the form of lost tax revenues.

BP has been on the hook for $21 billion in civil fines for violating the Clean Water Act, which mandates fines of $1,100 to $4,300 per barrel of oil spilled. Fines would likely fall on the high end of the spectrum if the court were to find BP acted with gross negligence in the events leading to the spill – a theory supported by numerous investigations but potentially difficult to prove in court.

Government officials estimate that BP’s blown-out Macondo well released 4.9 million barrels of oil, but last week U.S. District Judge Carl Barbier reduced BP’s oil spill liability by 810,000 gallons when BP successfully argued it collected that many gallons at the source before it polluted the water.

Anonymous sources told the New York Times that Clean Water Act fines would be limited to $6 billion under the settlement. Penalties of $9 billion would be funneled toward repairing environmental damages and restoration projects. The remaining $1 billion would go into a fund that could be used to address any unforeseen spill-related damages that appear in the future.

BP’s oil spill litigation is one of the biggest and more complex cases ever to go to trial in the U.S. If BP and the government fail to reach an agreement, the first phase of the trial will likely last three months. Most legal analysts predict that BP will eventually choose to settle to avoid replaying the spill’s gory details in the public eye, which could involve having some of its potentially damaging and embarrassing communications exposed.


New York Times