Gulf of Mexico Disaster: BP Liability

BP is liable for a minimum of 51.5 billion in civil penalties

The April 20, 2010 explosion of the Deepwater Horizon oil rig triggered the worst environmental disaster in U.S. history. Nearly 5 million barrels of oil gushed in the Gulf of Mexico over the course of 87 days. As a result of the explosion and spill, 11 workers were killed and 16 more were seriously injured, Gulf coast states have sustained approximately $40 billion in economic losses, a reported $10 billion in additional health cost will be required to manage health problems in the wake of the BP oil disaster, thousands of birds, sea turtles, marine mammals and other aquatic life have been harmed or killed, as well as, incalculable environmental damage.

Based on a conservative application of select federal laws that have been violated in connection with the Gulf spill tragedy, BP is liable for a minimum of 51.5 billion in civil penalties.

This list is not exhaustive nor does it reflect criminal penalties for the selected laws. Calculation of penalties associated with violation of wildlife laws are particularly conservative since multiplication factors that estimate how many more animals are killed than are actually observed or collected are not applied.

Pollution Laws

Clean Water Act Clean Water Act: $21 billion

Civil penalties for violating the Clean Water Act, state that a person who is an operator of an offshore facility from which oil is discharged shall be subject to a civil penalty in an amount up to $37,500 per day of violation or an amount of up to $1,100 per barrel of oil . . . discharged. If the federal government can prove gross negligence or willful misconduct, the financial tally rises to a civil penalty of not less than $140,000, and not more than $4,300 per barrel of oil . . . discharged. The upper limit is expected since both the national oil spill commission report and the joint investigative report between the Bureau of Ocean Energy Management, Regulation and Enforcement and U.S. Coast Guard make a definitive case that decisions that contributed to the well blowout qualify as gross negligence. The government has estimated 4.9 million barrels of oil spilled from the Macondo well. Therefore, civil fines for violating the Clean Water Act would be $21 billion.

Outer Continental Shelf Lands Act: $36 million

The federal Bureau of Safety and Environmental Enforcement issued 12 violations to BP based on a federal probe of the Deepwater Horizon disaster - five "incident of noncompliance" notifications and an additional seven offshore drilling regulation violations. Civil penalties for OCSLA states that any person who fails to comply with the OCSLA, or leases, permits, regulations . . . shall be liable for a civil penalty of not more than $35,000 for each day of the continuance of such failure. In the case of the oil spill, violations may have covered just one day or up to 87 days - the time crude was gushing into the Gulf - creating a maximum tab per incident of $3.05 million. Potential civil penalties for all of the violations are upwards to $36 million.

Criminal penalties provides that any person who knowingly and willfully: (1) fails to comply with the OCSLA, or leases, permits, regulations; (2) makes any false statement, representation, or certification in any application, record, report, or other document filed or required to be maintained under OCSLA; (3) falsifies or tampers with any monitoring device required by OCSLA to be maintained; or (4) reveals any data or information required to be kept confidential by OCSLA shall be fined up to $100,000, or imprisoned not more than 10 years, or both.

Natural Resource Damage Assessment: $31 billion (does not include additional clean-up cost as required by the OPA.)

Oil Pollution Act’s (OPA) Natural Resource Damage Assessment considers (1) the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources; (2) the diminution in value of those natural resources pending restoration; (3) the reasonable cost of assessing those damages. Federal and state officials are conducting a review known as a natural resource damage assessment to measure the injury to the gulf habitat and devise a plan for restoring it, a process that will takes years. BP pledged $1 billion for immediate use while the oil was still gushing. Any restoration efforts financed by the $1 billion will count toward the company’s final liability.

Based on the National Wildlife Federation’s estimate which used the Exxon Valdez settlement as precedent - the per-gallon amount paid by Exxon for restoration Alaska’s Prince William Sound was $152,000. Assuming the parties to the Gulf disaster negotiation settle at roughly the same per-gallon amount for the 206 million gallons released from the Macondo well, a restoration payment in the amount of $31 billion would be in order.

Wildlife Laws

Endangered Species Act: $37 million

Under the ESA, it is a misdemeanor to “take,” meaning to wound, harass, or kill, a member of a species protected by the Act. If the prosecution establishes a “knowing” violation then a civil penalty of not more than $32,500 for each violation would be levied. This means the actor must anticipate the spill and know that it will cause harm to the species. A neglect finding would be assessed as a civil penalty of not more than $650 for each violation. Criminal penalties state that any person who knowingly violates provisions under the ESA may be fined up to $50,000 or imprisoned up to one year, or both.

Just looking at one species harmed by the BP oil disaster illustrates multimillion dollar fines and possible imprisonment for responsible parties. A very conservative estimate of 1,146 killed sea turtles - species that are federally listed as endangered or threatened - at $32, 500 each would make BP liable for approximately $37 million in civil fines or $57 million in criminal penalties and multiply prison sentences.

Marine Mammal Protection Act: $286 million

Violations of the MMPA are misdemeanors, but the MMPA imposes a higher culpability standard by requiring violations to be done “knowingly.” A person who knowingly violates any provision of MMPA shall, upon conviction, be fined not more than $20,000 for each such violation, or imprisoned for not more than one year, or both. Civil administrative penalties declares that any person who violates the act or its regulations may be assessed a civil penalty of up to $11,000 for each such violation.

Data from an April 2011 report by the Center for Biological Diversity, details 26,000 marine mammals directly injured or killed as a result of the oil spill. Liability estimates for marine mammals would be a minimum of $286 million and as much as $500 million and multiply prison terms.

Migratory Bird Treaty Act: $123 million

Violation of the MBT is a misdemeanor, liability is strict, which means it is unnecessary to prove intent to cause the death of birds. The BP oil spill has killed thousands of birds, making BP liable under this Act. MBTA provides that any person, association, partnership, or corporation who violates the MBTA, shall be guilty of a misdemeanor and be fined up to $15,000 or imprisoned up to six months, or both.

According to the Center for Biological Diversity report 8,200 birds have been officially collected and identified as injured or dead due to the oil spill. A conservative estimate of damages associated with MBTA violations would be 123 million plus imprisonment.

Other applicable laws

Seaman’s Manslaughter Statute: $5.5 million

Federal prosecutors can also pursue Seaman’s Manslaughter charges against BP managers for their role in last year’s Gulf of Mexico oil rig explosion. If found guilty under the Seaman’s Statute, criminal penalties include up to 10 years imprisonment per violation (person killed) and fines of $250,000 per violation for individuals and $500,000 fine per violation for a company.

Making False Statements 18 U.S.C. § 1001

The broad federal false statement statute, 18 U.S.C. § 1001, makes it a crime to make any “materially false, fictitious, or fraudulent statement or representation” in connection with “any matter within the jurisdiction of the” federal government. Federal prosecutors could pursue convictions under this title if false statements were made to the government in obtaining any permits or approvals for operating the rig or in compliance reports about applicable environmental and safety regulations.

A violation of this provision is subject to a five-year prison term for each violation. The recommended sentence can be based on the amount of the loss caused to victims of the crime, and this could include the environmental damage caused by the oil spilling up on the beaches of the Gulf Coast. Additionally, prosecutors could charge BP’s executives with criminal fraud based on evidence that they exaggerated the company’s cleanup capacity and the time needed for spilled oil to reach the shore.

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