UPDATE: The settlement has been announced and there’s bad news and good news. The criminal fine — while on one hand it is indeed the largest in American history, at $4.5 billion — falls far short of making good on the damage BP did to the Gulf and is in fact less than the company typically earns in just one three-month quarter, according to its financial reports.
The good news is that Attorney General Eric Holder announced there’s no civil settlement with BP and that in fact there may well be a trial over damages in 2013. That indicates that the Justice Department actually agrees with the headline of this post. That, and the manslaughter indictment of two BP executives, is a strong start in the right direction. Congratulatiions to the federal prosectors for what they have accomplished today. But there’s much more work to be done.
ORIGINAL POST: There’s major news this morning for all of us who’ve been fighting to preserve the Gulf Coast in the wake of the 2010 Deepwater Horizon case:
A person familiar with the deal says BP agrees with U.S. to pay billions of dollars in fines related to the spill.
The person, who spoke on condition of anonymity because they were not authorized to speak on the record about the deal, also said two BP employees face manslaughter charges over the death of 11 people in the explosion of the Deepwater Horizon oil rig that triggered the massive spill.
The person said BP will plead guilty to obstruction for lying to Congress about how much oil was pouring out of the ruptured well.
The Deepwater Horizon rig, 50 miles off the Louisiana coast, sank after the April 2010 explosion. The well on the sea floor spewed an estimated 206 million gallons of crude oil, soiling sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing.
Politically, it’s interesting that this news comes so soon after President Obama’s election to a second term. One has to wonder whether BP was waiting to see if it could get a better deal with a Mitt Romney administration with its known pro-Big Oil bias, and whether Obama’s victory forced the company back to the negotiating table. And given the likely size and severity of the penalties, you’ll be hearing a lot of spin in the coming days about what a great deal this is for the citizens of the Gulf. I will say this, it’s about time that the feds — who’ve appeared at many times over the last 31 months to be in the tank for BP — took a more aggressive posture toward the firm.
Still, it’s hard to believe the hype.
Ask yourself, if this is such a great deal for the American taxpayer and such a harsh rebuke to a company whose negligence killed 11 people and spewed 5 million barrels into the Gulf, why is BP so eager to sign off on this? I would argue that any settlement that is OK with BP must, by definition, not be enough of a penalty for the thousands of Gulf residents that the oil company’s wanton misconduct made sick, or the marine life that’s been damaged for generations to come.
Here are a few things to consider:
1) Is a BP settlement really better than bringing the company to trial before a jury of Gulf Coast residents who’ve seen their family and friends suffer harsh economic consequences and medical distress because of the company’s wrongdoing? Remember, it was less than three months ago that the Justice Department filed court papers in New Orleans accusing BP of gross negligence, which would dramatically increase the penalty that BP would have to pay.
“The behavior, words, and actions of these BP executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall,” government lawyers wrote in the filing on Aug. 31 in federal court in New Orleans.
Some experts said a gross negligence finding could have added $21 billion in penalties. Is that money to restore the Gulf that’s been left on the table?
2) Oil from the Deepwater Horizon site is still contaminating the Gulf. Twice in the last 15 months, this blog and our friends — particularly the pilot and environmentalist Bobby Schumaker from the group Wings of Care — have exposed fresh sheens of Macondo oil near the site of the Deepwater Horizon accident. Most recently, BP and the feds insisted that the oil was a small leak from a containment dome and that the problem has been fixed. But in recent days, Schunaker’s flyovers have continued to discover fresh oil, raising the question of whether the actual source is a crack in the sea floor — as we have long suggested.
In other words, how can you reach a settlement in a crime that’s still ongoing?
3) I’m currently involved in a fairness hearing over a related matter: BP’s proposed $7.8 billion settlement with residents and business owners in the Gulf. I’ve been arguing on behalf of my clients in that case for a do-over of the agreement — in part because the boundaries for damages, along with other disparities, seem arbitrary and capricious, and in part because of the arguments above, that we’re still coming to terms with the extent of BP’s destruction.
So it concerns me that a too hasty or inadquate settlement with the feds may aid the rush to judgment in the $7.8 billion case.
Two final things to consider. BP made $25.7 billion in profits in 2011 — a year it was supposedly still reeling from the aftermath of the spill — and so its capacity to truly address the damage it caused is more than available. And since news of this supposedly harsh penalty, the company’s shares have been trading about 1.5 percent higher on Wall Street this morning. Tens of thousands of Gulf Coast residents are still suffering from the aftereffects of the Deepwater Horizon catastrophe.
To read more about BP’s settlement talks with the federal government, please check out: http://www.nola.com/news/gulf-oil-spill/index.ssf/2012/11/bp_close_to_settlement_with_us.html#incart_m-rpt-2
To find out more about the federal allegations of gross negligence against BP, please read: http://www.reuters.com/article/2012/09/05/bp-oilspill-negligence-idUSL2E8K50HN20120905
Check out my Nov. 12 argument for a do-over in the $7.8 billion BP settlement at: http://www.stuarthsmith.com/arbitrary-and-capricious-bp-settlement-needs-a-do-over/
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