BP could face an $18bn fine for its part in the Deepwater Horizon oil spill disaster

'Grossly negligent' BP could be fined $18bn over oil spill

A US judge has decided that BP was "grossly negligent" and "reckless" in the 2010 Deepwater Horizon oil spill, a ruling that could mean fines of up to $18bn.

That would be on top of the running total of more than $42bn in charges the company has taken for the worst offshore environmental disaster in US history after the rig explosion and spill in the Gulf of Mexico that killed 11 workers and spewed oil for nearly three months onto the shorelines of several US states.

The disaster struck when a surge of methane gas known to rig hands as a "kick" sparked an explosion aboard the Deepwater Horizon rig as it was drilling the mile-deep Macondo 252 well off Louisiana.

BP said it would appeal last night’s ruling by US District Judge Carl Barbier in New Orleans, Louisiana, who held a trial without a jury last year to determine who was responsible for the disaster where he apportioned 67 per cent of the fault to BP, 30 per cent to Transocean, which owned the drillship, and 3 per cent to Halliburton, which did cement work on the Macondo well.

"The Court concludes that the discharge of oil 'was the result of gross negligence or willful misconduct' by BP," Barbier said in his written ruling. "BP's conduct was reckless."

In response, BP said it would challenge the ruling because it believes the standard for proving ‘gross negligence’ was not met. "BP believes that an impartial view of the record does not support the erroneous conclusion reached by the District Court."

The judge has yet to assign damages from the spill under the federal Clean Water Act or rule on how many barrels spilled, but David Uhlmann, a University of Michigan law professor and former chief of the Justice Department's environmental crimes section, said the ruling "dramatically increases" BP's liability for civil penalties under the act.

Under federal rules, a gross negligence verdict carries a potential fine of $4,300 per barrel, compared to a maximum of $1,100 per barrel on a simple "negligence" verdict. BP says 3.26 million barrels leaked from the well and the US government says 4.9 million barrels spilled, though the fines will exclude about 810,000 barrels collected during clean-up.

Previous calculations by Reuters have shown fines could run to $17.6bn in the costliest scenario under a 'gross negligence' finding – far more than the $4.5bn maximum fine that could have been levied under a simple 'negligence' ruling and dwarfing the $3.5bn BP has set aside for fines under the Clean Water Act.

If the gross negligence ruling stands, it could create a tough new standard and raise liability risks for the deepwater drilling and other high risk industries, legal and business experts said.

There will be "long-term repercussions," Gianna Bern, who teaches international finance at the University of Notre Dame, said of the energy sector. "Potential liability is now in the stratosphere and that limits the number of players that can engage in this type of activity."

The case could go on for months or even years with Barbier set to assign damages after the next phase of a civil trial over the accident, scheduled for January 2015. The two earlier phases of the trial looked at how to apportion blame and examined how much oil spilled.

Even after the Clean Water Act fines are set, BP may face other bills from a lengthy Natural Resources Damage Assessment, which could require BP to carry out or fund environmental restoration work in the Gulf, and other claims.

A separate criminal case was settled with the US government in late 2012. BP agreed to pay $4.5bn in fines. Gulf Coast states will receive a portion of any fines BP pays to the government.

US Attorney General Eric Holder said in a statement: "We are confident this decision will serve as a strong deterrent to anyone tempted to sacrifice safety and the environment in the pursuit of profit."

Transocean and Halliburton have settled some liabilities and the judge said they were shielded by indemnity clauses with BP. Texas-based Anadarko Petroleum, which owned a quarter of the well, might have to pay fines under the Clean Water Act, though it has settled other claims with BP.

 

Further information: BP Deepwater Horizon oil spill

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