... BP to Dispute Gulf Spill Penalties - North American Energy Pipelines

BP to Dispute Gulf Spill Penalties

After a reported plea bargain fell through, BP is preparing to defend itself in the federal civil trial beginning Feb. 25 regarding the 2010 Deepwater Horizon incident. The case is pending in the U.S. District Court for the Eastern District of Louisiana, and the proceeding is the first of at least two phases the court has set for the trial.

The first phase will be focused on the causes of the Deepwater Horizon oil spill, who should be held responsible and to what degree. Judge Carl J Barbier will preside over the trial.

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“We have always been open to settlements on reasonable terms, failing which we have always been prepared to defend our case at trial,” said Rupert Bondy, group general counsel of BP. “Faced with demands that are excessive and not based on reality or the merits of the case, we are going to trial. We have confidence in our case and in the legal team representing the company and defending our interests.”

The court will determine the legal and factual issues at the heart of the case, including whether BP or any other party was grossly negligent.

“Gross negligence is a very high bar that BP believes cannot be met in this case,” Bondy said. “This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent.”

Oil flow rate and quantification of barrels of oil spilled are issues that will be addressed in the second phase of the trial, which is scheduled to begin in September. As BP previously stated, although there is inherent uncertainty in this quantification, the company believes that the government’s public estimate of 4.9 million barrels of oil released is at least 20 percent overstated.

“These issues are extremely complicated as a technical matter, and there is still further analysis to do,” Bondy said. “But it is clear, based on our analysis so far, that the government’s public estimate is simply wrong.”

Whatever the final number of barrels released from the reservoir is proven to be, BP does not believe that the 810,000 barrels of oil that the company successfully captured from the Macondo reservoir without it entering the Gulf of Mexico waters should be considered in the court’s future determination of Clean Water Act penalties. Under the Clean Water Act, civil penalties are assessed only on oil that has actually entered the environment and potentially caused harm.

The U.S. Department of Justice has indicated that it agrees with BP’s position on this issue. On the basis that the 4.9 million barrels figure includes an overestimate of at least 20 percent, and given that a further 810,000 barrels need to be deducted from the volume that flowed from the reservoir, BP believes that a figure of 3.1 million barrels should be the uppermost limit of the number of barrels spilled that should be used in calculating a Clean Water Act penalty.

Finally, the court has broad discretion to assess a per-barrel Clean Water Act penalty between zero and the statutory maximum. In deciding on the per-barrel fine, the court must consider not only the level of culpability, but also seven other statutory penalty factors. The intent behind the statute is to enable courts to account for the violating company’s conduct following the violation where public policy merits such treatment. In practice, courts have historically awarded only a fraction of the statutory maximum penalty, generally choosing penalties that are far closer to zero than to the statutory maximum. Bondy said that the company’s immediate actions following the oil spill should weigh in favor of the company receiving a penalty lower than the maximum.

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