|December 24, 2014|
Oil spill trial by the numbers: How much will BP pay?
|The Justice Department and BP on Friday (Dec. 19) gave a preview of the arguments they plan to make during the final phase of the oil spill trial. The trial, which starts Jan. 20, will determine how much in fines BP and its partners will pay for the 2010 Gulf of Mexico oil disaster.|
The federal government intends to fight for oil spill fines of close to $18 billion, what it argues is the highest fine under the Clean Water Act, the federal law that governs oil spills. BP and its partners argue the law calls for a much lower penalty.
Prior phases of the oil spill trial sought to determine who was responsible for the disaster and the number of barrels of oil spilled into the Gulf of Mexico.
In September, U.S. District Judge Carl Barbier ruled BP bore most of the blame for the disaster. Barbier ruled BP's actions amounted to "gross negligence," exposing the company to the maximum in fines. Barbier has yet to make a ruling on the number of barrels of oil spilled.
Friday's filings provide more detail as to how each side thinks oil spill penalties should be calculated.
Here are some key numbers from Friday's pre-trial statements.
Congress set the cap for environmental liabilities at $3,000 per barrel of oil spilled when it passed the Clean Water Act in 1990.
Federal prosecutors argue BP owes as much as $4,300 under existing Environmental Protection Agency rules governing oil spills. Separately, the Coast Guard said its rules require fines of up to $4,000 per barrel.
Both the EPA and the Coast Guard per-barrel amounts adjust for inflation, though each agency follows a different formula.
BP asked the court in November to cap fines at $3,000 per barrel. Using varying agency guidelines to set a statutory fine is "a recipe for legal chaos," the company said.
BP reiterated that call on Friday, though it said it would be willing to agree on an alternative maximum fine of $3,300 per barrel. That was the amount adopted in the last Coast Guard ruling that both parties agreed was calculated correctly.
That's the minimum penalty the Justice Department says BP deserves for its role in the spill.
The U.S. government argues BP deserves the maximum $18 billion fine, or $4,300 for each of the 4.2 million barrels of oil the government estimates billowed into the Gulf.
"If ever there was a case that merits the statutory maximum, this is it," the government wrote in its pre-trial filing.
Should the court choose to impose a lower fine, however, the government argues it should go no lower than $16 billion. The government acknowledges that BP has already paid $4 billion to settle criminal charges and spent billions of dollars on oil clean up. But it said BP "had its own economic motivations" for taking those measures.
That's the amount BP has set aside to date to cover costs and claims from the Gulf of Mexico oil spill. This includes $14 billion the company said it spent on oil spill clean up.
BP points to its existing oil spill liability as reason for lower fines under the Clean Water Act.
The company said BP Exploration & Production Inc., the subsidiary on trial in the civil case, has operated at a loss since the spill and sold off assets to fund oil spill costs.
BP said the Clean Water Act's goals are to deter behavior that will harm the environment and ensure quick response when harm does occur.
The company said its growing oil spill tab is "sufficient to deter any potential violator from engaging in behavior likely to result in a future release."
The government argues most of the money to fund clean up efforts came from the BP Group, not BP Exploration.
That was the price of a barrel of West Texas Intermediate crude oil on Dec. 18, 2014.
BP noted that the price for the benchmark crude has fallen from $96 on Aug. 15, when the first round of expert reports for this phase of the trial were issued.
BP said BP Exploration & Production has already taken a financial hit due to falling oil prices. The $18 billion fine the U.S. government seeks would deal a significant, perhaps fatal, blow, the company said.
BP said a fine on the lower end of the statutory range would accomplish the goal of the Clean Water Act without drowning the drilling subsidiary in fines.
That's the maximum fine BP and its partners would face if the company wins its bid to cap fines at $3,000 per barrel. This would be the top fine under the federal government's oil release scenario of 4.2 million barrels of oil.
The top fine would rise to $13.9 billion if the court agrees to the alternative $3,300-per-barrel cap proposed by BP.
That's the amount in penalties Anadarko Petroleum Corp. says it should pay.
Anadarko was a non-operating investor in the Macondo well at the time of the spill. The Houston-based company argues it should not be subject to any Clean Water Act fines.
Anadarko noted the court has already ruled the company was not responsible for the spill. Anadarko agreed in October 2011 to a $4 billion settlement with BP to help pay oil spill claims.
The company said the settlement is adequate payment given it bears "no fault for the discharge" of oil.
"There is no reasonable justification for any punishment," Anadarko said.