Bloomberg News

BP Wins Final Approval of Guilty Plea Over Gulf Oil Spill

January 29, 2013

BP Wins Final Approval of Guilty Plea Over 2010 Gulf Spill Vance

The $4 billion in fines and penalties sanctions BP for its mishandling of the Deepwater Horizon drilling rig which killed 11 workers and sent millions of gallons of oil spewing into the Gulf of Mexico and surrounding wetlands. Photographer: Derick E. Hingle/Bloomberg

BP Plc (BP/) won final approval of a $4 billion guilty plea that resolves all criminal charges against the company related to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

U.S. District Judge Sarah S. Vance in New Orleans concluded today that BP Exploration & Production Inc., a unit of London- based BP, can take responsibility for the charges tied to the biggest offshore oil spill in U.S. history, including 11 counts of felony seaman’s manslaughter.

The BP unit’s plea is a “reasonable disposition” of the charges, Vance said at a court hearing. The $4 billion in fines and penalties “appears reasonably calculated” to properly sanction BP for “the serious consequences” of its mishandling of the Deepwater Horizon drilling rig, she said.

The plea includes a record $1.26 billion criminal fine and monitoring of the company’s future drilling operations. It doesn’t resolve separate civil claims by the U.S. and states bordering the gulf that allege BP violated pollution laws. Among them is $17.6 billion in potential penalties for environmental violations. BP also faces potential fines by affected states.

11 Fatalities

The blowout and explosion on the Deepwater Horizon off the coast of Louisiana killed 11 workers and sent millions of gallons of oil into the gulf and surrounding wetlands. The spill prompted President Barack Obama to impose a moratorium on deep- water drilling and later forced BP to agree to spend at least $7.8 billion to settle lawsuits over the incident.

Under the terms of the plea, BP will be on probation for five years and can pay the fines and penalties within that period, Vance said today.

“The Deepwater Horizon explosion was a national tragedy that resulted in the senseless deaths of 11 people and immense environmental damage,” Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division said in an e-mailed statement. “ BP has received just punishment for its crimes leading up to and following the explosion.”

Company Apology

BP officials apologized at today’s hearing for the deaths of the workers on the rig and accepted responsibility for wrongdoing in connection with the spill.

“BP knows there is nothing we can say to diminish their loss, but I am here to express our apology for their loss on behalf of the entire company,” Luke Keller, a vice president in BP’s U.S. unit, told family members of the dead rig workers at today’s hearing. “Our guilty plea makes clear that BP understands and acknowledges its role in that tragedy, and we apologize.”

The April 2010 Macondo well blowout sent almost 5 million barrels of oil spewing into the gulf, according to a U.S. government report. The accident sparked the filing hundreds of lawsuits against BP and its partners, including Transocean Ltd. (RIG:US), the Vernier, Switzerland-based owner and operator of the drilling rig, and Houston-based Halliburton Co. (HAL:US), which provided cementing services on the facility.

Private Claims

BP agreed in March to pay at least $7.8 billion to resolve private plaintiffs’ claims for economic loss, property damage, and spill- and pollution-related injuries. Thousands of plaintiffs opted out of the accord, and their claims are proceeding toward trials. The settlement came just days before a scheduled trial on liability for the spill.

Injured rig workers and relatives of the men killed in the explosion sent Vance more than a dozen letters urging her to reject BP’s plea deal. Many victims told the judge they wanted the company to apologize and face a more severe punishment.

Keith Jones, a Baton Rouge attorney whose son, Gordon, was killed in the 2010 rig explosion, urged Vance to reject the plea saying it let the oil company off too easily.

‘Petty Cash’

“$4 billion is a huge amount of money to you and me. It is not to BP,” he told the judge. “It is petty cash to BP. Their stock went up after this plea deal was announced.” BP’s estimated revenue for 2012 was $353.6 billion, according to data compiled by Bloomberg.

Buddy Trahan, a Transocean employee who survived the blast, told Vance he hadn’t received any compensation from BP despite suffering severe injuries.

“The government has caught the bank robber and cut a deal with the bank robber and left the people shot in the bank robbery to fend for themselves,” he said.

The BP unit also pleaded guilty today to one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act and one felony count of obstruction of Congress, under terms of the agreement.

Contract Bar

The misdemeanor plea under the Clean Water Act triggered debarment of the facility where the violation occurred, meaning that it would be prevented from entering into new contracts or leases with the U.S. government, BP said in statement. Scott Dean, a BP spokesman, declined to comment beyond the statement.

The Environmental Protection Agency in November suspended BP and its units from winning new government contracts because of the company’s “lack of business integrity” tied to the spill. The temporary ban doesn’t affect existing contracts.

The EPA didn’t say how long the ban would be in place. Suspensions generally last for fewer than 18 months or until the end of legal proceedings. BP was the U.S. Defense Department’s biggest fuel supplier in 2011. That year it won awards valued at about $1.35 billion, a 33 percent boost from $1.02 billion the previous year, according to data compiled by Bloomberg.

Largest Penalty

The criminal penalty provided for in the settlement is the largest in U.S. history, eclipsing the $1.195 billion paid by Pfizer Inc. for marketing fraud in 2009.

Today’s plea has no effect on criminal charges against two BP well-site leaders accused of involuntary manslaughter, seaman’s manslaughter and Clean Water Act violations over their supervision of drilling operations on the rig.

Prosecutors contend the men had multiple indications that the well wasn’t secure and “failed to maintain control” of it, according to court filings. A third BP official was charged with obstruction of justice for misleading lawmakers about the size of the spill.

As part of today’s plea, BP officials admitted that a senior executive withheld documents, provided false and misleading information in response to the U.S. House of Representatives’ request for flow-rate information, and manipulated internal estimates to understate the amount of oil flowing from the well, prosecutors said.

Different Numbers

BP officials publicly stated that 5,000 barrels of oil a day was flowing into the gulf. Experts concluded later that the figure was more than 60,000 barrels a day, the government said.

BP still faces as much as $17.6 billion in potential fines for alleged Clean Water Act violations and demands by the U.S. and gulf states for enough money to restore the region’s coastline and waters to their condition before the spill.

U.S. District Judge Carl Barbier has scheduled a nonjury trial starting Feb. 25 in his New Orleans court, where he will apportion civil liability among BP and the other companies involved in the disaster.

Transocean officials said earlier this month that the rig owner agreed to pay more than $1.4 billion, including a $400 million criminal penalty, to end a federal criminal probe over its role in the explosion and spill.

Transocean will plead guilty Feb. 14 to one misdemeanor count of violating the Clean Water Act and agree to five years’ probation, prosecutors said in a Jan. 3 filing.

The case is U.S. v. BP Exploration, 2:12-cr-292, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Jef Feeley in New Orleans at jfeeley@bloomberg.net; Allen Johnson Jr. in New Orleans at allenmct@gmail.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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Companies Mentioned

  • RIG
    (Transocean Ltd)
    • $42.89 USD
    • -0.36
    • -0.84%
  • HAL
    (Halliburton Co)
    • $68.99 USD
    • -0.36
    • -0.52%
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