BP facing $13.7B fine for Deepwater Horizon

Ruling on the issues raised in the Phase 2 trial of the Deepwater Horizon case: the quantification of oil spilled and BP’s source control efforts following the accident, United States District Court for the Eastern District of Louisiana found BP was not grossly negligent, reckless, wilful, or wanton in its source control planning. However, the company is still facing a multi-billion fine.

The court has explained that a major factor in this determination is the fact that BP’s source control plan complied with federal regulations and industry practice.

The Court has also concluded that that BP’s conduct does not make it a superseding cause of the oil spill, nor does BP’s conduct warrant a reallocation of comparative fault among BP, Transocean, and Halliburton.

BP facing a hefty fine

As for the amount of oil discharged from the reservoir, the Court found 4.0 million barrels of oil released from the reservoir. After deducting the Collected Oil, (collected without contacting any ambient sea water) from this amount, the Court found for purposes of calculating the maximum possible civil penalty under the Clean Water Act that 3.19 million barrels of oil discharged into the Gulf of Mexico.

To remind,  the United States had proposed that 5.0 million barrels of oil exited the reservoir, resulting in a net discharge of 4.19 million barrels once adjusted for the Collected Oil, whic BP estimated that 3.26 million barrels of oil released from the reservoir, resulting in a net discharge of 2.45 million.

No penalty has yet been determined. The decisions in the Phase 1 and Phase 2 trials represent steps in the process of assessing a CWA penalty. The third phase of the CWA trial, currently scheduled to begin in the Court on Tuesday, 20 January, 2015, will address the penalty to be assessed.

The government has said that BP should pay $4.300 per barrel spilled, which would now, using the number of 3.19 million barrels spilled, cost BP $13.7 billion

“BP believes that considering all the statutory penalty factors together weighs in favor of a penalty at the lower end of the statutory range,” BP has said in a statement.

Deepwater Horizon

The blowout preventer (BOP) that was intended to shut off the flow of high-pressure oil and gas from the Macondo well in the Gulf of Mexico during the disaster on the Deepwater Horizon drilling rig on April 20, 2010, failed to seal the well because drill pipe buckled for reasons the offshore drilling industry remains largely unaware of, according to a new two-volume draft investigation report released recently by the U.S. Chemical Safety Board (CSB).

The blowout caused explosions and a fire on the Deepwater Horizon rig, leading to the deaths of 11 personnel onboard and serious injuries to 17 others. Nearly 100 others escaped from the burning rig, which sank two days later, leaving the Macondo well spewing oil and gas into Gulf waters for a total of 87 days. By that time the resulting oil spill was the largest in offshore history. The failure of the BOP directly led to the oil spill and contributed to the severity of the incident on the rig.

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