By Michael Northcott Thursday, 15 November 2012

BP agrees £2.8bn US fine over Deepwater Horizon disaster

The oil giant has agreed to pay the largest-ever criminal penalty in US history following an investigation into the 2010 Gulf of Mexico oil spill.

It does seem rather a long time since people were talking about the Deepwater Horizon oilrig exploding and pouring millions of gallons of crude oil into the ocean. But it’s trending again today, after BP agreed to pay an aggregate of $4bn to the US Department of Justice as part of a criminal prosecution. This should resolve all criminal claims over the episode.

In addition, the firm is expected to plead guilty to 11 criminal felony charges because of the deaths of 11 workers on the rig when it went up in flames; it will plead guilt to two charges of criminal misdemeanours because of the aftermath of the slick; and it will plead guilty to one more criminal felony charge over what it told Congress about the amount of oil being spilt. Apparently it downplayed the speed at which oil was gushing out of the well. 

For those who have forgotten, the Deepwater Horizon disaster was the largest accidental offshore oil spill the world has ever seen. It was a deep-sea oilrig whose safety mechanisms failed when a ‘gusher’ of oil started pouring out of the seabed. The initial explosion killed 11 people working on the rig, and the millions of gallons of oil that gushed to the surface over a number of months blighted hundreds of miles of coastal landscape once the oil made landfall. It took several attempts to stop the leak, during which management were criticised for not being sufficiently proactive.

In short, it was a PR and financial disaster for BP’s business. The chief executive Tony Hayward was one of many who lost their jobs among senior executives. Many thought it unfair however, that several other American companies which has been involved in supplying safety equipment and constructing the rig, appear to have got off scot-free. They suggest that Obama scored some political capital by calling BP ‘British Petroleum’, a name it hasn’t used for years, and labelling it a ‘British’ problem.

So, whoever was to blame, what will BP’s total bill be for this debacle? Well, it’s still not clear. BP had budgeted $38.1bn for all fines, costs, compensations and cleanup expenses, but this latest set of costs adds another $3.85bn to the total. Oh yes, and then there are the hundreds (if not thousands) of civil claims related to the disaster, which will not be handled by authorities or regulators. BP’s chief executive, Bob Dudley, said: ‘All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region.

‘We apologise for our role in the accident, and as today’s resolution with the US government further reflects, we have accepted responsibility for our actions.’ On the upside, some were speculating that BP might have to pay up to $14bn in this latest round of negotiations with authorities. If that was ever on the table, then this $4bn is a walk in the park by comparison… 

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