BP avoids maximum punishment, faces $13.7bn fine over Gulf oil spill
UK oil giant BP faces a maximum $13.7 billion in penalties from the Deepwater Horizon Gulf of Mexico oil spill in 2010, which many claim to be the worst environmental disaster in US history. The fine is much less than the $18 billion feared.
The US District Judge Carl Barbier ruled Thursday that the company spilled 3.19 million barrels of oil into the Gulf of Mexico in April 2010, less than previously claimed by the US government. The court, which earlier ruled the company acted negligently in the lead up to the spill has not determined a final penalty.
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Had the court ruled BP was “grossly negligent” instead of just “negligent” in their cleanup efforts, the company could have been slapped with an $18 billion fine. This means BP can only be fined $1,100 per barrel spilled, instead of $4,300 per barrel under a “gross negligence” ruling.
BP has already spent more than $28 billion in spill response, cleanup and claims.
Avoiding the maximum fine sent BP Plc shares up 1 percent Thursday on US floors, and on Friday shares continue to climb 2.83 percent to £403.73 in London at 10:00am GMT.
BP issued a formal statement in reaction to the ruling on Thursday confirming the company will be subject to the Clean Water Act (CWA) penalty, and said it is still reviewing the court's decision.
Europe’s third largest company has already spent more than $40 billion in cleanup and claim costs for the Deepwater Horizon oil spill, which was the result of an offshore oil rig exploding, killing 11 people and spewing nearly 5 million barrels of oil into the Gulf, leaving behind an oily ring the size of Rhode Island on the seafloor.
The British company’s reputation has been severally tarnished by the incident, both in the US and worldwide, and the stock price indicates this blacklash, but it has slowly recovered, and this ruling may be one of the final chapters in the spill saga.
The favorable ruling in the Deepwater Horizon case doesn’t mean the company’s legal woes are over. It is still in the settlement process for a separate spill-related case in Louisiana, which is expected to bring $18 billion in Clean Water Act penalties. After that, BP can still be hit with bills from the Natural Resources Damage Assessment, as well as a string of other claims.
BP has been downsizing since the Deepwater Horizon oil spill, and in December announced plans to cut 300 from its 4,000 employees in the North Sea Division, as well as back office analysts. BP has 84,000 employees worldwide, 15,000 of whom are based in the UK and 20,000 in the US.
Falling oil prices are also taking its toll on the oil major. Since peak oil prices of $115 in June, futures have dropped nearly 60 percent, dropping below $45 per barrel for the first time in 6 years this week.
Low prices are fueled by the current oversupply in oil paired with over production in OPEC countries, Russia, and the US.
One of the main liabilities of the company is that it has invested heavily in Russia, and it owns a nearly 20 percent stake in Rosneft, the Russian state-run oil company.