How Are Things for BP When the Chance of a $14 Billion Hit Comes as a Relief?

By Paul Barrett

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BP

Things are bleak enough for BP that word of potential liability of only $13.7 billion in an oil pollution trial constitutes good news.

In proceedings scheduled to restart in federal court in New Orleans next week, the Justice Department wanted to sock the British-based company with up to $18 billion in damages stemming from the massive April 2010 Gulf of Mexico spill. So today's ruling from U.S. District Judge Carl Barbier could be seen--sort of--as a $4.3 billion victory.
In the interim ruling, Barbier decided on the extent of a spill that killed 11 rig workers and spewed crude oil in a wide swath of the gulf off Louisiana, Texas, and Alabama. Based on extensive technical evidence, the judge said BP lost control of 3.19 million barrels, no small amount. He rejected the government's estimate of 4.2 million barrels.
The sheer volume of the oil dump now becomes a key factor in the third phase of the trial, due to begin January 20. Under the Clean Water Act, Barbier is obliged to assess the extent of the spill in light of a series of factors that include the polluter's attempts to contain the disaster
once it got under way, the economic effects of the penalty on the company, the benefits BP enjoyed from operating the way it did before the spill, and the company's history of other violations. BP could end up on the hook for an amount ranging from single-digit billions of dollars up to the $13.7 billion ceiling.
In an e-mail, BP's top U.S. spokesman, Geoff Morrell, said the company "believes that considering all the statutory penalty factors together weighs in favor of a penalty at the lower end of the statutory range."
Environmentalists disagree. In a joint statement issued before Judge Barbier's ruling, the Environmental Defense Fund, National Wildlife Federation, and National Audubon Society said: "The court has the opportunity and responsibility to make it right, to hold BP fully accountable for the damage done to the gulf and to assign the maximum penalty to BP for its gross negligence."
The Clean Water Act trial is only one component of the fallout from the 2010 spill. BP has already spent more than $28 billion to pay for cleanup and claims. It has taken a $43 billion charge to cover all of its costs, including under the Clean Water Act. And in a separate part of the multifaceted proceedings in New Orleans, the company is still fighting with plaintiffs' lawyers over private business and economic claims that were once estimated to total less than $8 billion but are now headed toward $10 billion or possibly much more.
In other words, it will be quite a while before BP can put a final price tag on its well-documented negligence in the Gulf of Mexico. The environmental groups said they "are hoping, after five long years, that justice is close." Barbier's ruling is another step toward legal finality, but the end probably isn't that near, even now.