NEW ORLEANS – A U.S. prosecutor said in court Tuesday that government experts will show BP is overstating how well it mitigated the 2010 Gulf of Mexico oil spill, and that the company shouldn’t get much of a break on a potential $13.7 billion in fines merely for complying with the law.
“We’re not here to say BP did a bad job in the response action – they didn’t,” Justice Department attorney Steven O’Rourke told a federal judge in New Orleans in opening statements to kick off the penalty phase of BP’s oil spill trial, which will continue for three weeks.
O’Rourke said only responses to Hurricane Katrina and the Sept. 11, 2001 terrorist attacks compared in size and intensity to the response to the Deepwater Horizon disaster. But while it was the biggest environmental response in U.S. history, he said, it “wasn’t necessarily the best response action ever.”
U.S. prosecutors and BP’s attorneys gathered in a New Orleans courtroom Tuesday for the first day of the third and final phase of a trial combining much of the civil litigation arising from the spill. In this round, U.S. District Judge Carl Barbier is taking testimony to determine how much BP will pay in environmental penalties for its role in the disaster.
BP hopes to convince Barbier to slash its fines while government lawyers say that if the judge reduces fines at all, it should be by no more than $2 billion. The company should pay at least $11.7 billion, O’Rourke said.
BP lawyer Mike Brock, in his opening statements, said BP’s response was effective, and that the company’s U.S. oil unit cannot afford the high penalties without the intervention of its parent company — a situation that would go against prosecutors’ intent.
In detailing the consequences of the spill, O’Rourke said it put 55,000 workers who responded at risk, with around 6,000 injuries and illnesses reported; fouled 1,100 miles of Gulf beaches and marshland; killed 400-year-old coral on the ocean floor and hundreds of birds; and destroyed wildlife habitats.
BP’s initial response collected just 5 percent of the oil that was spilled, O’Rourke said.
“By any measure this spill was extremely serious,” O’Rourke said, adding it’s still too early to know the full extent of environmental damage inflicted by the oil gushing from BP’s Macondo well in the Gulf. The British oil company, he said, is asking the court, in considering fines, to credit it for response actions it took alongside hundreds of other organizations and government agencies.
O’Rourke also attacked the arguments he anticipates BP will make about its U.S. oil subsidiary’s ability to pay high environmental fines. BP Exploration & Production’s total assets were valued at $25 billion in the fourth quarter of 2014 — well above the $13.7 billion maximum fine prosecutors are seeking — and it has paid $16 billion in dividends to its parent company from 2007 to 2010.
O’Rourke also noted that BP has said it is on tract to report $31 billion in operating cash flow for 2014. “In short,” he said, “BP can pay the statutory maximum without impacting its operations.”
Brock said Barbier should consider the current condition of the company in assessing fines. The BP attorney said falling oil prices, which have crumpled to less than half their value since June, have significantly reduced the equity value of BP’s U.S. oil unit, which has fallen from $16.1 billion before the oil crash to $5.1 billion now. The subsidiary could only pay $2.28 billion — its available credit — if the fines were levied this year, he said.
Barbier asked if there was any reason the fines couldn’t be structured to be paid over several years. O’Rourke responded he knew of at least one such case under the Clean Water Act.
“Seems like that’s certainly relevant if that becomes a factor to what the company can pay in one swoop,” Barbier said. It was the judge’s only comment during the parties’ opening statements.
Brock had also responded to O’Rourke’s criticisms on the oil spill response. He said studies show 99.3 percent of observed birds had no visible oiling at the time of the spill; of the more than 400 sea turtles brought in for rehabilitation after they were covered in oil, more than 96 percent survived; of 18,000 water samples, 98 percent were deemed safe for aquatic life, according to the Environmental Protection Agency’s benchmarks for toxicity.
“There was no collapse of the ecosystem,” Brock said. “The injury wasn’t nearly what folks feared in 2010,” he said, adding BP believes that is in part “due to the robustness of the response.”
BP and other organizations, he said, recovered 37 percent of the oil spilled before it reached Gulf beaches in Louisiana and surrounding states — well above the typical 10 to 15 percent collected in most spill responses. In the initial response, around 260,000 barrels of oil were removed, he said. The response involved 411 controlled burns, 264 workers and 43 vessels.