BP is preparing for an emotional hearing in a New Orleans courtroom, where company officials will face victims of the 2010 Gulf of Mexico rig explosion and oil spill and a judge who will decide whether to accept a criminal plea deal.
U.S. District Judge Sarah Vance has said she plans to announce her decision Tuesday after hearing from lawyers for BP and the Justice Department, spill victims and relatives of some of the 11 men who were killed when the Deepwater Horizon drilling rig exploded and sank.
The explosion about 50 miles off the coast of Louisiana occurred after BP’s undersea Macondo well blew out, leading to the worst offshore oil spill in U.S. history.
If Vance accepts BP’s agreement to plead guilty to 14 criminal charges, including manslaughter and obstruction of Congress, she will impose the sentence the company negotiated with the U.S. government: a $4 billion criminal penalty, five years’ probation and independent monitoring.
If she rejects the deal, Vance will allow BP to withdraw its guilty plea and go to trial. The prospect of a trial, which could result in tougher penalties, would create more uncertainty for BP after its lawyers have spent nearly three years trying to resolve the company’s legal liability for the disaster.
Such an outcome doesn’t help BP and could cause “more pain for shareholders,” Oppenheimer & Co. analyst Fadel Gheit said.
Morningstar analyst Stephen Simko said he thinks it’s unlikely that Vance will reject the agreement outright.
“If it were to happen, I don’t think it would cause a major stock market reaction,” Simko said. “Though it would increase Macondo uncertainty a little, at the same time I don’t believe the market perceived this to be an overly advantageous deal from BP’s perspective.”
Even if she doesn’t reject the plea bargain, Vance could seek to modify it.
A BP spokeswoman declined to comment on how BP might respond to any changes in the agreement, who will enter the guilty plea if BP goes ahead with it as planned, or any other aspects of the company’s preparations for Tuesday’s hearing.
BP also has agreed to pay a $525 million fine to resolve related Securities and Exchange Commission violations. A different judge already has approved that deal.
Federal judges have wide latitude in sentencing, and guidelines are advisory, not mandatory.
In the criminal case, Vance will weigh the wishes of victims against those of BP and the Justice Department, which believe the deal is fair and appropriate. She also will consider a sealed recommendation from federal probation officials.
As of Friday, 30 people had submitted emotional statements expressing how the disaster has affected their lives. Some want Vance to reject BP’s deal. Others have asked the judge to impose a harsher penalty.
BP and the Justice Department have responded that the hefty fine in the plea agreement is tough enough.
“The financial message, sent through the criminal sanction in this case as well as other sanctions and exposures, many of which continue to be negotiated and litigated, for BP and the world is one of substantial deterrence and punitive effect,” says a memo they jointly filed with the court earlier this month.
The widows of several of the men who were killed on the rig have asked to speak at the hearing.
Shelley Anderson, who lost her husband, Jason Anderson, is among those planning to address Judge Vance directly.
“As far as what she does or doesn’t do, it’s not really my concern,” Shelley Anderson said. “Just being able to be there and say what I want to say, I think that would give me at least a little bit of closure.”
Long legal road ahead
Whatever happens at the plea hearing, it won’t be the end of the legal road for London-based BP and its partners on the ill-fated Macondo project.
BP, which says it already has spent $24.2 billion on cleanup efforts, various litigation and other claim settlements, still faces the potential of having to pay billions in civil fines over the amount of oil that spilled.
A civil trial consolidating much of the remaining civil litigation is scheduled to begin Feb. 25 in New Orleans.
BP has argued the U.S. government overstated the amount of oil that was discharged by BP’s well, though the company has never publicly stated a figure of its own. Recent court filings that address data and witness testimony show the issue remains contentious.
Two BP well-site leaders, a former executive and a former engineer also face criminal charges in the case. They are preparing for trial.
Transocean fines: $1.4B
Meanwhile, drilling contractor Transocean, which owned the Deepwater Horizon, has agreed to plead guilty to a single misdemeanor charge of violating the Clean Water Act and pay a $1 billion civil fine and a $400 million criminal fine. Transocean’s guilty plea is set for Feb. 14, before a different judge in the same courthouse where BP will appear Tuesday.
Halliburton, the cement contractor on the Macondo job, has not reached any settlements with the government or other parties. Executives said Friday no talks are currently ongoing and the company is preparing for the February civil trial.
Tuesday’s hearing comes amid renewed questions about worker safety following a Jan. 16 terrorist attack at the Ain Amenas natural gas facility in Algeria that killed about three dozen workers. BP, one of the operators of the plant, has said it fears four of its employees were among the dead.
The government has confirmed that three Americans, including two from the Houston area, were killed.