Oil giant BP has been hit with a “record” fine from the federal government as liability for 2010′s deadly explosion and subsequent oil spill in the Gulf of Mexico. It’s only one step in a lengthy claims process over spill damage that will likely take many more months to conclude.
But breathless coverage over the government’s stiff penalty fails to put the billions at stake into context — the British oil company will merely dispense with some ”pocket change” for putting perhaps America’s greatest natural resource at risk.
Attorney General Eric Holder announced on Thursday a settlement over the 2010 Deepwater Horizon spill that forces BP to pay more than $4 billion over five years as punishment for safety and regulatory failures that led to the worst oil spill in the nations history. The government said that BP was “grossly negligent” in its drilling operations prior to the disaster.
BP has entered into a settlement with the U.S. Justice Department of all criminal claims involving the Deepwater Horizon oil spill for $4 billion, to be paid in installments over five years, and a settlement with the Securities and Exchange Commission that will include the payment of $525 million over three years. The company also pleaded guilty in U.S. District Court in New Orleans to 11 felony counts of misconduct or neglect of ships’ officers relating to the loss of 11 lives in the explosion in April 2010.
The settlement is likely to prove a boon for Louisiana, with $1.2 billion to be used to rebuild barrier islands and build a Mississippi River freshwater and sediment diversion.
During a news conference in New Orleans on Thursday afternoon, a cadre of federal officials took BP to task because of the explosion and spill, citing a culture of profit and privilege at the company, including instances when BP purposely downplayed the amount of oil flowing into the Gulf.
U.S. Attorney Eric Holder said the government’s action against the company is “to hold accountable those who bore responsibility for this tragedy.” Holder said the government also is looking forward to the civil trial, now scheduled for Feb. 25, “in which we intend to prove that BP was grossly negligent in causing the oil spill.”
BP also faces justice for the deaths of 11 workers on the Deepwater Horizon in the massive explosion that preceded the record breaking spill. Three employees of the company have been charged with manslaughter or lying to investigators in relation to the deaths aboard the BP rig.
The charges are also seen as “unprecedented,” though families of the victims are not satisfied with the level of responsibility taken by BP. The only other company official charged with a crime in the explosion and spill was a mid-level engineer accused of deleting text messages.
Two men who worked for BP during the 2010 Gulf oil spill disaster have been charged with manslaughter and a third with lying to federal investigators, according to indictments made public Thursday, hours after BP announced it was paying $4.5 billion in a settlement with the U.S. government over the disaster.
A federal indictment unsealed in New Orleans claims BP well site leaders Robert Kaluza and Donald Vidrine acted negligently in their supervision of key safety tests performed on the Deepwater Horizon drilling rig before the explosion killed 11 workers in April 2010. The indictment says Kaluza and Vidrine failed to phone engineers onshore to alert them of problems in the drilling operation.
Another indictment charges David Rainey, who was BP’s vice president of exploration for the Gulf of Mexico, on charges of obstruction of Congress and false statements. The indictment claims the former executive lied to federal investigators when they asked him how he calculated a flow rate estimate for BP’s blown-out well in the days after the April 2010 disaster.
News of the settlement and details of the Obama administration’s decision to commit to a deal that is seen as lenient and favorable towards BP was met with immediate outrage from spill victims and environmental activists.
With BP already accused of reneging on promises to residents and business owners along the Gulf Coast to pay for spill-related costs and losses, critics were shocked that the government would accept a compromise on penalties that amounts to a fraction of the company’s profits and the actual costs of long-term damage to the Gulf, “record” fine or not.
The harshest reactions to the settlement claim that BP is “getting away with murder” and that the federal government has dropped the ball in enforcing responsibility among oil companies even as they aggressively expand drilling operations in US territory.
In a statement released after Attorney General Holder’s announcement, Greenpeace says that the deal “fails every aspect of the commonly held notion of penalty” and that the fine levied against the oil giant “amounts to a rounding error for a corporation the size of BP.”
Greenpeace senior investigator Mark Floegel issued the following statement in response to the reports:
“Today’s announcement of a proposed settlement between BP and the US government fails every aspect of the commonly accepted notion of penalty.
“This proposed settlement would not hold the guilty accountable for their actions. This fine amounts to a rounding error for a corporation the size of BP. It is far less than Shell Oil has already spent in the Arctic, without yet commencing serious operations.
“BP management is clearly hanging low-echelon technical and engineering staff out to dry while making no significant changes to their disastrous business model.
“This proposed settlement would not protect the innocent. Nothing in this proposed settlement gives any oil company incentive to be more careful in future operations. Cutting corners and skimping on safety will still be the rule of the day.
Reaction to the settlement was similar from the group Public Citizen. They called it “pathetic” and noted that financial penalty was a fraction of BP’s most recent annual profit.
We’re stunned. This settlement is pathetic. The $4 billion penalty is equivalent to just a fifth of the company’s 2011 profits.
The point of the criminal justice system is twofold: to punish and to deter. This does neither. It is a weak-tea punishment that provides zero deterrence to BP or other companies. Consider that after the 2005 Texas refinery explosion that killed 15 people, BP pleaded guilty to a criminal charge and paid a fine. Now, after a 2010 event that killed 11 people, BP is again pleading guilty and paying a fine. Zero deterrence.
Although the government is right to pursue manslaughter charges against two individuals BP employees, the settlement is inadequate to address BP’s repeated criminal conduct.
The government must impose more meaningful sanctions. Nothing in this settlement stops BP from continuing to get federal contracts and leases. BP will earn more in annual federal contracts than it will pay in penalties as a result of this. That’s appalling.
Feeding anger at both BP for its refusal to fulfill promises of responsibility for the spill and the federal government for failing to force the oil company to act is the ugly truth that, almost three years after the disaster, destruction from the spill continues to effect the Gulf of Mexico and the U.S. Gulf Coast. Some experts pegged the true liability facing BP for economic and ecological damage at well over $50 billion, many times what the Obama administration wants the company to pay.
Scientists warn that “long term negative consequences” are inevitable when so much oil is dumped into a body of water as ecologically rich as the Gulf. More concerning, the decline of species and habitats in and around the Gulf stemming from the BP spill has accelerated at a pace faster than anyone predicted. Entire islands are disappearing as oil, still bubbling up from beneath the surface, chokes away any vestiges of life.
As stated by critics of the spill settlement, BP’s profits have fared much better than the Gulf of Mexico its oil has contaminated in the nearly three years after Deepwater Horizon. While total cost estimates related to the spill have risen, the company and its investors have enjoyed profits that beat forecasts and are satisfied that the lenient government penalty will allow BP to quickly “get back to business.”
The bulk of that “business” in the United States is drilling for oil, and the company has already resumed activity in the Gulf of Mexico at a pace equal or greater to output before the 2010 spill.
Even as the federal government admits “negligence” on the part of BP and full details of failures on their part to follow safety regulations have yet to be uncovered, BP has been drilling in the Gulf — including at sites just a few miles from the Deepwater disaster – for more than a year.
It’s not just BP; the federal government has taken a dramatic redirection in its policy towards drilling as the furor over the Gulf spill “fades.” After the federal moratorium on Gulf exploration expired, the Obama administration worked closely with oil companies — including BP — to open more of the Gulf of Mexico, Alaska, and other sensitive regions to drilling. More rigs are in the Gulf now than there were at the time of the Deepwater Horizon disaster.
While much of the administration’s policy shift was politically motivated and timed to sway voters before the recent presidential election, with President Obama repeatedly touting his record on expanding oil and gas exploration, there seems little appetite to take another look at the propriety and safety of offshore drilling with gas prices still high and investment in renewable technology taking a political hit.
For a time after the BP spill, the drilling moratorium ordered by the Obama administration caused a decline in gulf production, but a reversal has occurred. Forty rigs are drilling in the gulf today compared with 25 a year ago.
BP has five rigs drilling in the gulf, making it one of the most active drillers there. That is the same number BP operated before the accident, and it plans to have three more rigs drilling in the gulf by the end of the year.
The Energy Department recently projected that gulf oil production would expand from its 2011 level of 1.3 million barrels a day, still nearly a quarter of total domestic production, to two million barrels a day by 2020.
Last December, the Obama administration held its first offshore auction since the BP spill, granting leases for more than 20 million acres of federal waters — bigger than West Virginia. The leases are worth $330 million to the federal government and have the potential to produce 400 million barrels of oil.
BP successfully bid for 11 of the 191 available drilling blocks. Environmentalists challenged the auction of exploration rights, so far unsuccessfully, which precedes applications and approvals for actual drilling permits.
By the Obama administration’s accounting, 61 drilling permits for wells in more than 500 feet of water were granted in the 12 months ending Feb. 27, only six fewer than were permitted in the same period in 2009 and 2010 before the BP explosion.
“The political discourse about energy has really changed over the last two years,” said Daniel Yergin, the oil historian and author of “The Quest,” a book about energy security. Despite the BP accident, he added, “there’s a new focus on how U.S. oil production should increase both onshore and offshore.”