BP asks judge to cap spill penalties at $12 billion

HOUSTON – BP wants a federal judge to cap its potential oil-spill pollution fines at a maximum of $12.3 billion, a move that would cut away nearly a third of the penalties U.S. prosecutors are seeking for the Deepwater Horizon disaster.

The British oil giant argued in court papers Friday that the judge, in determining its fines, should disregard the higher penalties in Environmental Protection Agency and Coast Guard regulations because, it claimed, neither agency has the authority to raise maximum penalties above Congress’s $3,000-per-barrel cap for environmental liabilities under the Clean Water Act.

Pollution fines are set to be the central issue in January of the third and final phase of BP’s ongoing civil trial over the 2010 Gulf of Mexico oil spill. Prosecutors have said BP could owe up to $18 billion per EPA rules that trigger fines up to $4,300 per barrel of spilled oil. The Coast Guard has set fines at $4,000 per barrel.

On Friday, BP urged U.S. District Judge Carl Barbier in New Orleans to set a maximum $3,000 per-barrel penalty before the so-called penalty phase begins next year, or risk legal errors seeping into his future determinations on the fines.

“It cannot be the law that 20 or more federal agencies all simultaneously possess the power to inflate the civil penalty amounts,” BP wrote. “That would be a recipe for legal chaos.”

But that’s what the EPA and the Coast Guard have done, BP said, even though only the U.S. Attorney General has the power to raise maximum penalties. The law, BP said, renders those agencies’ rules invalid.

BP said the EPA and Coast Guard’s inflating of Clean Water Act penalty amounts “shows no rational pattern that comports with the statute.” The company noted that the EPA’s maximum fines are now set at $5,300 a barrel, up $1,000 from the year the oil spilled.

Maximum fines are triggered in the Clean Water Act if a well operator is found grossly negligent, a legal term that essentially means a party has made more than an ordinary lapse in attention or care.

Barbier had found in September that a series of mistakes by BP led to the spill, and that its actions – some driven by profit – amounted to gross negligence. Last week the judge reiterated his findings when he rejected BP’s request for a new trial.

BP said it will show at trial in January that the circumstances of the spill and the company’s multibillion-dollar response efforts “mean that nothing even approaching the maximum penalty should be awarded once the court hears and weighs all relevant facts.”

Eleven workers died and millions of barrels of oil spilled into the ocean after a blowout a mile below the sea level at BP’s Macondo well on April 20, 2010. The well was capped in September of that year. Thousands of lawsuits from Gulf Coast residents and businesses followed.

Federal attorneys have argued 4.1 million barrels spilled into the ocean during the 87-day crisis in the Gulf. BP has maintained that estimate is based on limited data and that only 2.5 million barrels spilled, meaning under its new math it would owe $7.5 billion. Barbier could rule on that amount, the subject of the trial’s second phase in September and October 2013, at any time.

BP has set aside $43 billion to pay for oil spill costs including efforts to clean up the spill, compensation and other fines. It has set aside just $3.5 billion for Clean Water Act penalties.