Fire crews battle the blazing remnants of the offshore oil
rig Deepwater Horizon, off Louisiana, in this April 2010
file photo. REUTERS/US Coast Guard/Files
BP Plc will pay $US4.5 billion ($NZ5.5bn) in penalties
and plead guilty to felony misconduct in the Deepwater Horizon
disaster, which killed 11 workers and caused the worst US
offshore oil spill ever.
The settlement includes a $US1.256 billion criminal fine, the
largest such levy in US history, the oil company says. Wall
Street analysts said the deal would allow BP to focus again
on oil production.
One US senator from Louisiana said he hoped the settlement
would not prevent his state and others for collecting civil
penalties. An environmental group said BP should ultimately
pay billions more.
The April 2010 explosion on the Deepwater Horizon rig in the
Gulf of Mexico killed 11 workers. The mile-deep Macondo oil
well then spewed 4.9 million barrels of oil into the Gulf
over 87 days, fouling shorelines from Texas to Florida and
eclipsing in severity the 1989 Exxon Valdez spill in Alaska.
The company said it would plead guilty to 11 felony counts
related to the workers' deaths, a felony related to
obstruction of Congress and two misdemeanors.
BP, which replaced its chief executive after the spill as its
market value plummeted, still faces economic and
environmental damage claims sought by four Gulf Coast states
and other private plaintiffs.
Its US shares gained about 0.3 percent on Thursday while its
London-traded shares were flat.
Wall Street analysts were encouraged that the plea deal could
resolve a significant share of the liability BP faces. But it
is not a "global" deal to resolve all outstanding liability.
"It certainly is an encouraging step," said Pavel Molchanov,
oil company analyst with Raymond James. "By eliminating the
overhang of the criminal litigation, it is another step in
clearing up BP's legal framework as it relates to Macondo."
Analysts said they hoped to receive more detail at a
presentation next month.
"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, energy analyst at
Macquarie in London.
The disaster has dragged BP from second to a distant fourth
in the ranking of top Western oil companies by value.
PROBATION AND MONITORS
A week after the US presidential election, the settlement
could also prompt a debate in Congress about how funds would
be shared with the Gulf Coast states.
Congress passed a law last year that would earmark 80 percent
of BP penalties paid under the Clean Water Act to Louisiana,
Mississippi, Alabama, Florida and Texas.
"With these unprecedented criminal penalties assessed, I urge
the Obama administration to be equally aggressive in securing
civil monies that can help save our Louisiana coast" through
other avenues, Louisiana Senator David Vitter said in a
statement. "I certainly hope they didn't trade any of those
monies away just to nail this criminal scalp to the wall."
Larry Schweiger, president of the National Wildlife
Federation called the settlement a "good down payment" on
what BP should ultimately pay, which the environmental group
argues is tens of billions of dollars more.
BP said the payments would be spread out over six years in
total, adding it expected to be able to handle the payments
"within BP's current financial framework".
The company has sold $35 billion worth of assets to fund the
costs of the spill. Matching that, it has paid $23 billion
already in clean-up costs and claims, and has a further $12
billion earmarked for payment in its spill trust fund.
The deal also includes a settlement with the US Securities
and Exchange Commission, plus payments to the National Fish
& Wildlife Foundation and the National Academy of
In addition to the penalties, BP agreed to go on five years'
probation and to the appointment of two monitors, one for
process safety and one for ethics. They have four-year terms.
The oil company said it has not been advised of any
government authority that intends to debar BP from federal
contracting activities as a result of the deal.
In an August filing, the Justice Department said "reckless
management" of the Macondo well "constituted gross negligence
and willful misconduct" which it intended to prove at a civil
trial set to begin in New Orleans in February 2013.
Negligence is a key issue. A gross negligence finding could
nearly quadruple civil damages owed by BP under the Clean
Water Act to $21 billion in a straight-line calculation.
Chief Financial Officer Brian Gilvary said the company's
provisions should be enough to cover liabilities, provided it
avoids a conviction for gross negligence, and that it had
shareholder support to fight the case should that happen.
"I can boldly defend where we are in the provisions today. If
something were to happen in the trial that read across to
gross negligence ... then we would certainly take that to
appeal," he said on a conference call with analysts.
Still unresolved is potential liability faced by Swiss-based
Transocean Ltd, owner of the Deepwater Horizon vessel, and
Halliburton Co, which provided cementing work on the well
that US investigators say was flawed.
Halliburton said it "remains confident that all the work it
performed with respect to the Macondo well was completed in
accordance with BP's specifications for its well construction
plan and instructions. Halliburton has cooperated with the
DOJ's investigation." Transocean was not available to
According to the Justice Department, errors made by BP and
Transocean in deciphering a pressure test of the Macondo well
are a clear indication of gross negligence.
"That such a simple, yet fundamental and safety-critical test
could have been so stunningly, blindingly botched in so many
ways, by so many people, demonstrates gross negligence," the
government said in its August filing.
Transocean disclosed in September that it is in discussions
with the Justice Department to pay $1.5 billion to resolve
civil and criminal claims.
BP has already announced an uncapped class-action settlement
with private plaintiffs that the company estimates will cost
$7.8 billion to resolve litigation brought by over 100,000
individuals and businesses claiming economic and medical
damages from the spill.