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BP to Pay $4.5 Billion in Damages for Deepwater Horizon Oil Spill in the Gulf of Mexico
Two years after the horrific Deepwater Horizon explosion and massive oil spill in the Gulf of Mexico, the verdict is in for oil giant BP. The company has agreed to pay $4.5 billion in penalties and it pled guilty for felony counts of misconduct. A full $1.256 billion of the total fine will be levied towards criminal punishment – one of the largest monetary disciplines in U.S history.
After years of litigation, BP finally faces retribution for the April 2010’s Deepwater Horizon debacle. The rig’s catastrophic failure killed 11 workers and spewed over 4.9 million barrels of oil into the Gulf, eclipsing the 1989 Exxon Valdez’s Alaskan spill as the worst environmental disaster the nation has ever seen. Today, BP said that it would plead guilty to 11 felony charges related to employee deaths as well as two misdemeanors for the obstruction of Congress. The company will pay $4.5 billion in damages, with the possibility of more to come with the number of environmental and grievance claims sought by private plaintiffs and Gulf Coast communities.
Their deal also includes a payment to the US Securities and Exchange Commission as well as the National Academy of Sciences and The National Fish & Wildlife Foundation. To fund the cleanup, BP has already sold $35 billion worth of assets with an additional $12 billion reserved for legal actions and claims. An un-capped class action settlement with over 100,000 private individuals could potentially cost BP an additional $7.8 billion.
Despite the news, U.S shares gained 0.3 per cent today while UK rates remained flat. Market analysts say that the settlement plea deal will remove a significant amount of liability, allowing BP to once again function as a business without the shadow of pending sanctions. “Of course you never like to see value moving out of the company, but it’s good news if this will allow them to be an oil company again,” said Jason Gammel, an energy analyst at Macquarie in London to Reuters.
Going forward, the penalties will almost certainly spark a debate in Congress as to how the money should be divided amongst Gulf Coast states. Last year, Congress passed a law that promised 80 per cent of all fines to be distributed to Florida, Mississippi, Louisiana, Alabama, and Texas under the Clean Water Act. The payments will be doled out by BP over the next six years. BP has acquiesced to five years probation and the oversight of two monitors for process safety and ethics. Future trials in 2013 initiated by the Justice Department in August may potentially increase civil damages to $21 billion if they are found guilty of further gross negligence under the Clean Water Act.
It’s still unclear how much fault lies with Swiss company Transocean Ltd (the owner of the Deepwater Horizon) and Halliburton, who provided the faulty cement work on the Macondo well. Transocean is currently in discussion with the Justice Department to pay $1.5 billion in damages. Since the spill, BP has gone from the second largest Western oil producer to the fourth.
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