BP spill ruling would cap fines at $13.7bn

OREANDA-NEWS. A US judge ruled that 4mn bl of crude were released from BP‘s Macondo well during the 2010 Deepwater Horizon oil spill, lowering BP's potential maximum Clean Water Act (CWA) fines to \$13.7bn from \$18bn.

The 4mn figure is less than the 5mn bl the US government estimated and more than BP's 3.26mn bl figure.

In his 44-page ruling judge Carl Barbier acknowledged that "there is no way to know with precision how much oil discharged into the Gulf of Mexico." However, Barbier's ruling is a key determination for potential CWA fines.

Subtracting the approximately 800,000 bl recovered from the well during the spill, that means BP will face CWA fines based on 3.19mn bl, or as much as \$13.7bn if the top per barrel fine is assessed. BP has argued the fines should be no more than \$2.7bn.

"BP believes that considering all the statutory penalty factors together weighs in favor of a penalty at the lower end of the statutory range," the company said today.

Both BP and the Justice Department said they are still reviewing the decision.

In his ruling Barbier found BP's spill control plans complied with federal rules and that the company was not grossly negligent in how it responded to the incident or in how it tried to cap the well through techniques such as the "Top Kill" and "Junk Shot."

The ruling comes just days before the third and final trial phase related to the CWA fines is set to begin in New Orleans. BP will argue next week that its willingness to immediately begin cleaning up the spill and pay billions of dollars in claims to residents and businesses are reasons to assess per barrels fines on the low end of the range.

The US Justice Department will argue that BP should face the maximum penalty under the CWA because it was grossly negligent in its actions leading up to the spill. The government will also point to what it calls BP's history of unsafe and unethical practices in the US, pointing to criminal and civil settlements over a deadly 2005 refinery accident in Texas, a large oil spill on Alaska's North Slope in 2006 and propane market manipulation allegations.

The trial is expected to take about three weeks.

In the first phase of the trial, held in 2012, BP and other companies involved in drilling the well argued over their degree of negligence and culpability in the accident. In November Barbier found that BP was grossly negligent in its actions leading up to the spill but he divided culpability for the accident between the parties, with BP taking 67pc of the burden, 30pc for drilling rig owner and operator Transocean and 3pc for drilling contractor Halliburton.

If the judge uses that breakdown for calculating the fine that could mean a \$9.2bn maximum fine for BP. But Tom Claps, a legal analyst with Susquehanna Financial who has tracked the case, said BP's liability should be closer to \$7bn-\$8bn when the judge considers all the mitigating factors.

BP has already spent \$43bn on the spill and set aside \$3.5bn pay CWA fines.

Anadarko Petroleum, which owned a 25pc stake in the well, could face up to \$3.5bn in CWA fines based on the ruling. The company has said it set aside \$90mn for CWA fines.