By Emily Pickrell
BP’s multibillion-dollar settlement with those who suffered medical or economic damages in the 2010 Gulf oil spill leaves the company facing environmental claims for which state and federal governments will demand billions more.
Analysts said Saturday that the settlement announced late Friday is a significant step. BP estimated the cost of the settlement at $7.8 billion, but it contains no cap on damages and therefore could be higher or lower depending upon how many plaintiffs accept it and how much they’re paid.
“It strikes me as a reasonable settlement for both sides,” said David Uhlmann, the former head of the U.S. Justice Department’s Environmental Crimes Section. “It is a substantial amount of money and should be sufficient to compensate everyone who suffered financial losses for the spill. BP may have paid a modest premium to settle, but it puts the company another step closer to moving beyond the Gulf oil spill.”
Still looming, however, are civil and possibly criminal claims under federal and state laws, notably the federal Clean Water Act — which alone could bring fines of more than $20 billion if calculated on terms least favorable to BP.
BP’s Macondo well, located in mile-deep water off the Louisiana coast, blew out on April 20, 2010, destroying the Deep¬water Horizon drilling rig, killing 11 workers and unleashing a three-month underwater gusher that poured million of barrels of crude into the Gulf of Mexico.
The oil spill closed some areas to fishing and wreaked havoc on coastal tourism when it reached the beaches of Gulf Coast states. In addition, coastal residents and crews hired to clean up the mess complained of skin, respiratory and other ailments from exposure to the oil and the chemical dispersants.
Trial put on hold
The settlement Friday is aimed at damages like those. BP and a Plaintiffs’ Steering Committee that negotiated for thousands of individuals and businesses struck the deal just ahead of the scheduled Monday start of a trial on litigation from the disaster.
U.S. District Judge Carl Barbier of New Orleans, who would have conducted the trial and must approve the settlement, has delayed the trial indefinitely while he and remaining parties sort out the issues still pending and how to address them.
These include civil claims by state and federal governments, an ongoing criminal investigation by the U.S. Justice Department, cross-claims among BP and other companies involved in the Macondo project, and individual plaintiffs who may choose to opt out of the class action deal.
Civil fines under the Clean Water Act could total $21.5 billion if the spill were found to have resulted from gross negligence and BP were assessed the maximum fine of $4,300 for each of the 5 million barrels the government estimates spilled. A barrel is 42 gallons.
Absent gross negligence — defined as substantial deviation from reasonable care — the fines could be up to $1,100 per barrel.
BP has challenged that estimate of the amount spilled, and likely would insist on paying less than the maximum in exchange for a settlement. Legal experts have speculated the company will try to reach a deal with the federal government that also resolves criminal liability with additional fines or other sanctions.
The government is conducting a criminal investigation, but to date the disaster has not resulted in criminal charges.
Criminal provisions of the Clean Water Act allow for penalties up to twice the amount of the economic loss resulting from the accident — in contrast to the civil penalties, which are specifically tied to the amount spilled.
Criminal case possible
Chick Foret, a former federal and state prosecutor, said criminal charges might arise if, for example, investigators found evidence that firms or individuals involved in the Macondo project deliberately provided misinformation about its risks before the spill or the severity of the accident in its aftermath.
The federal government is seeking civil damages from BP and others involved in the Macondo project including Transocean, which owned and operated the Deepwater Horizon. Both have denied gross negligence.
“We have a strong case,” U.S. Attorney General Eric Holder said last week in testimony before the House Appropriations Committee. “People, organizations have to be held accountable, responsible for the lives that were disrupted, the economic harm that was inflicted.”
Transocean stands firm
Transocean is not a party to the new settlement, and said Friday night that “deals made by other players do not change the facts of this case, and we are fully prepared to argue the merits of our case based on those facts.”
The class action settlement sets up procedures for claimants to file for economic or medical damages, or both, and includes an appeals process for those who consider settlement offers insufficient.
The deal also sets a time limit for claimants who wish to opt out and seek independent settlements or trials.
Uhlmann speculated that the federal government may have insisted any settlement with it come after BP settles with most private claimants.
“The government cares about making sure that BP is properly punished and that natural resource damages are addressed,” he said, “but it also cares that victims are made whole. Addressing economic losses is an important part of the government response in any oil spill.”