Could Gulf Spill Costs Kill BP? Not Likely, But There Are Some Significant Unknowns


You’ve likely been noticing that BP’s financial hit from its spill has fallen way short of early estimates, at least so far. Now the Associated Press is out with an analysis showing just how well the company is managing its liability. And again, let me say “so far.”

The AP energy writer Chris Kahn, reports it thus: Cleanup, government fines, lawsuits, legal fees and damage claims will likely exceed the $40 billion that BP has publicly estimated, according to an Associated Press analysis. But they’ll be far below the highest estimates made over the summer by legal experts and prominent Wall Street banks, such as Goldman Sachs, which said costs could near $200 billion. BP will survive the worst oil spill in U.S. history for several key reasons: it has little debt; its global businesses are forecast to generate $26 billion next year in cash flow from operations; the environmental impact of the spill isn’t as bad as feared; and the government seems unlikely to ban BP from Gulf drilling.

The story does a good job breaking down the range of cost areas, concluding that: The AP analysis shows the company is likely to face $38 billion to $60 billion in spill-related costs. A settlement with the federal government could reduce that amount, while a successful class-action lawsuit could add billions more.

To that I would immediately note one of several wild cards, the one too often left out of such calculations: punitive damages. Juries can and will punish Big Oil for negligence, and those courtrooms are far removed from the lobbying efforts that have so far shut down congressional action.

There are other wild cards. For example, as regular readers know, my clients and colleagues and I are among those cautioning that the jury is still out on seafood safety. As more independent research enters the fray, that could be a significant financial responsibility for BP and its many partners.

(The Raw Story has a new report on our efforts at

The AP analysis does not address the seafood issue, but does acknowledge that there’s a debate over how much oil remains: …scientists disagree about how much oil remains in the Gulf, but already the streaky sheens of oil on the surface are mostly gone. The more oil that remains, the greater the potential for environmental lawsuits.

But the AP offers a good snapshot at a moving target. See the story here:

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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