In BP Trial, the Amount of Oil Lost Is at Issue By CLIFFORD KRAUSS Published: September 29, 2013 HOUSTON — With billions of dollars in penalties at stake, the civil trial of the British oil company BP begins its second phase on Monday, which will set the amount of oil that spilled into the Gulf of Mexico from the 2010 Deepwater Horizon rig explosion that killed 11 workers and soiled hundreds of miles of beaches. The government will argue that a total 4.2 million barrels of oil was discharged into the sea over 87 days, the equivalent of nearly one-quarter of all the oil that is consumed in the United States in a day. BP will counter that the number was closer to 2.45 million barrels. This phase of the trial will also determine if BP prepared adequately for a blowout and if it responded properly once the oil started flowing. Both sides will present their case in Federal District Court in New Orleans using competing technical calculations over the next four weeks. Hanging in the balance are Clean Water Act fines that range from a maximum of $1,100 for every barrel spilled through simple negligence to as much as $4,300 a barrel if a company is found to have been grossly negligent. “This will be largely a battle of experts,” Blaine G. LeCesne, a law professor at Loyola University New Orleans. The first phase of the trial, which took place over two months this year, centered on whether BP and its contractors were guilty of gross negligence — tantamount to wanton and reckless behavior — in causing the blowout of the Macondo well. Judge Carl J. Barbier has not ruled yet on the question in the bench trial. But if he agrees with the government’s position that there was gross negligence and that 4.2 million barrels was spilled, the fines could amount to more than $18 billion. “They would have to sell assets to keep the company afloat,” said Fadel Gheit, a senior oil analyst at Oppenheimer & Company. “It would wipe out all of their cash.” But if BP’s position is upheld that there was simple negligence and only 2.45 million barrels were spilled, then the total fines would amount to no more than $2.7 billion. In all likelihood, a decision or settlement will reach a dollar figure in between, legal experts say. BP pleaded guilty last year to 14 criminal charges, including manslaughter, and admitted negligence in misreading important tests before the explosion. It also agreed to pay $4.5 billion in fines and other penalties. Four current or former employees also face criminal charges. The company has spent more than $42 billion on cleaning up the environment and compensating victims. People and businesses continue to file claims for damages, and there is no cap to the damages. The company has struggled to get back on its feet since the accident by divesting itself of less profitable operations and expanding oil production from Angola to the North Sea. In the early days after the accident, the company took a conciliatory approach to resolve disputes with the gulf states and claims seekers, but it is now taking a more aggressive stance in court. In advertisements, it claims that a multibillion-dollar settlement with victims of the spill has been misinterpreted by the claims administrator. The company has complained bitterly of misconduct within a court-supervised claims program, and last Monday it made a third request to Judge Barbier to suspend settlement payments. The newest request came a few weeks after the former F.B.I. director Louis Freeh issued a report that found that several staff members of the claims program had taken kickbacks for referrals. Patrick Juneau, the claims administrator, said the improprieties had been isolated. So far, Judge Barbier has rejected BP’s requests for a suspension of payments, and Mr. Freeh said the claims center should continue its work despite the irregularities. The second phase of the trial will determine not only how much oil spilled, but also whether BP was negligent or grossly negligent for not being prepared for a spill and during its efforts to stem the flow of the well between April and July 2010. The plaintiffs, which include the federal government, several gulf states and private claims seekers, have argued in papers that BP “repeatedly lied to key decision makers about the flow rate of the well.” They added, “but for BP’s fraud, the well could have been capped weeks earlier.” The Justice Department, in its statement to Judge Barbier, also asserted that BP was being deceitful. It argued that BP’s low spill estimates depended on calculations “that contradict those used by BP in making drilling decisions and during the response.” BP and its well partner, Anadarko Petroleum, argued in their filing that the government’s spill amount was based on estimates generated over a single weekend in July without taking into account that the flow changed over time because of erosion and other factors. In another filing, BP noted that its engineers and contractors had worked closely with the federal government to secure the well. “BP’s engineers shared an abundant amount of data with government representatives, including holding daily meetings at which they shared material information regarding the source control strategies being developed,” said one filing, which also noted that BP, along with other oil companies, had developed spill response plans that had the approval of federal regulators before the accident. Mr. LeCesne, the Loyola University New Orleans law professor, said it was difficult to predict the outcome of the trial. He said there was still a chance for an out-of-court settlement. “It’s anyone’s guess what is going to happen,” he said. “There is still great litigation risk for the both United States government and BP regardless of whether there is gross or ordinary negligence determination, because the court has the discretion to determine the per-barrel amount of the fines.” Under the Clean Water Act, only BP, and perhaps to a lesser extent Anadarko Petroleum, would be responsible for paying the fines for the spilled oil. Edward F. Sherman, a Tulane University law professor, said a decision could readily be appealed by BP. “Given the complexity of the record, that could take a lengthy time,” he said, “especially if BP sees it to their advantage to drag things out, hoping in the long run to reach an agreement with the government.” The contractors Halliburton and Transocean have joined with the plaintiffs and government in arguing that BP lied about the flow rate, delaying the final capping of the well. Transocean has already pleaded guilty for its role in the spill and agreed to pay $1.4 billion in civil and criminal fines under the Clean Water Act. Halliburton pleaded guilty to criminal charges for destroying computer test results that had been sought as evidence and agreed to pay $200,000 in fines.
Posted on: Mon, 30 Sep 2013 04:29:25 +0000
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