Fri, Nov 16, 2012 - Page 15 News List

BP to pay record fine for 2010 oil spill, sources say

DEEPWATER HORIZON:The oil giant will also admit to criminal misconduct in the explosion that killed 11 workers and caused the worst oil spill in US history

Reuters, HOUSTON, Texas and WASHINGTON

BP PLC is expected to pay a record criminal penalty and plead guilty to criminal misconduct in the 2010 Deepwater Horizon disaster through a plea agreement it has reached with the US Department of Justice that may be announced as soon as yesterday, according to sources familiar with discussions.

Three sources, who spoke to Reuters on condition of anonymity, said BP would plead guilty in exchange for a waiver of future prosecution on the charges.

One of the sources did not disclose the amount of BP’s payment, but said it would be the largest criminal penalty in US history. That record is now held by Pfizer Inc, which paid a US$1.3 billion criminal fine in 2009 for marketing fraud related to its Bextra pain medicine.

BP and the justice department declined to comment.

London-based oil giant BP has been locked in months-long negotiations with the US government and Gulf Coast states to settle billions of dollars of potential civil and criminal liability claims resulting from the April 20, 2010, explosion aboard the Deepwater Horizon rig.

The deal could resolve a significant share of the liability that BP faces after an explosion killed 11 workers and fouled the shorelines of four Gulf Coast states in the worst offshore spill in US history. BP, which saw its market value plummet and replaced its CEO in the aftermath of the spill, still faces economic and environmental damage claims sought by US Gulf Coast states and other private plaintiffs.

The fine would far outstrip BP’s last major settlement with the justice department in 2007, when it paid about US$373 million to resolve three separate probes into a deadly 2005 Texas refinery explosion, an Alaska oil pipeline leak and fraud for conspiring to corner the US propane market.

It is unclear what form of criminal misconduct BP would plead guilty to. In an August filing, the department said “reckless management” of the Macondo well “constituted gross negligence and willful misconduct,” which it intended to prove at a pending civil trial set to begin in New Orleans in February next year. The US government has not yet filed any criminal charges in the case.

Negligence is a central issue to BP’s potential liability. A gross negligence finding could nearly quadruple the civil damages owed by BP under the Clean Water Act to US$21 billion in a straight-line calculation.

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. Both companies were not immediately available for comment.

Transocean in September disclosed that it is in discussions with the department to pay US$1.5 billion to resolve civil and criminal claims.

The Macondo well spewed 4.9 million barrels of oil into the Gulf of Mexico over a period of 87 days. The torrent fouled shorelines from Texas to Florida and eclipsed in severity the 1989 Exxon Valdez spill in Alaska.

BP has already announced an uncapped class-action settlement with private plaintiffs that the company estimates will cost US$7.8 billion to resolve litigation brought by more than 100,000 individuals and businesses claiming economic and medical damages from the spill.

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