BP says oil spill bill over $2 billion would be “severe”

HOUSTON – Any fine above $2 billion against BP for the Deepwater Horizon disaster would be “extraordinary and severe,” double the highest-ever U.S. water-pollution fine and potentially crippling its American oil business, BP said in court documents.

Five years after the catastrophic oil spill, BP’s court filing late Friday marked the final legal argument it can make before a federal judge is clear to render environmental fines as high as $13.7 billion for the 2010 Gulf of Mexico oil spill.

The London oil company said a fine of more than $2 billion would be 58 times greater than any civil Clean Water Act fine before Deepwater Horizon, and it argued it shouldn’t have to pay a high penalty because it has already shelled out $27.5 billion to clean up the spill and compensate claimants along the Gulf. It also wants credit for its $1.25 billion criminal penalty.

“The practical impact of this staggering amount of past spending is that BPXP (BP’s U.S. oil unit) has less capacity to shoulder a CWA penalty today,” it said. “Reducing the penalty against a violator that has less capacity to pay because of its proactive and beneficial spending on spill response is an entirely appropriate and just outcome contemplated by the (Clean Water Act) statute.”

BP for months has argued that oil spill liabilities and the current slump in crude prices have battered its U.S. oil-production company, BP Exploration & Production, to the point it can’t handle big penalties. At the end of last year, the unit was worth just $5 billion, it says.

In its reply, the U.S. government said the spill warrants at least $12 billion in fines and that U.S. District Judge Carl Barbier would be well within his rights to consider the bigger BP parent company’s assets in calculating the fines.

“The issue is whether the parent was closely involved with the polluting activities and siphoned profits from that subsidiary,” government prosecutors said. “The BP Group promised to pay all claims resulting from Macondo, but now seems to be saying the opposite.”

In any case, the prosecutors calculated the U.S. unit’s assets are worth $25 billion – though BP has said that valuation depends on oil prices being above $100 a barrel. The government also blasted BP’s argument that a high penalty would render the U.S. unit insolvent.

“BPXP was insolvent in 2011 to 2012, and there is no evidence that the insolvency changed or jeopardized BPXP’s operations in any way,” the prosecutors said, arguing the BP parent company alone makes investment decisions for the group.

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