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BP Settlement Agreement Includes $4.5 Billion in Fines

by Matt Metzner, published

BP Settlement Agreement


British Petroleum (BP) has agreed with the Department of Justice and the Securities and Exchange Commission to plead guilty to eleven felony charges of misconduct and negligence relating to eleven deaths on the Deepwater Horizon rig that exploded in the Gulf of Mexico in 2010. The settlement agreement also includes $4.5 billion of payments over the course of five years to resolve all criminal claims, an additional $525 million over three years of securities violations, and an additional $3.8 billion in civil penalties, by plans to defend itself “vigorously” against remaining civil claims.

The eleven felony counts relating to the deaths of workers on the platform coincide with one misdemeanor under the Clean Water Act, one misdemeanor under the Migratory Bird Treaty Act, and one felony count of obstruction of Congress. The plea agreement will now go before a court for approval.

Thirteen of the fourteen criminal counts to which BP pleaded guilty are related to the incident which caused the oil spill. The obstruction of Congress felony charge relates to reports that BP published regarding flow rates following the initial damage.

The Deepwater Horizon explosion and subsequent spill are considered the largest accidental release of oil into marine waters in history. Prior to capping the spill, an estimated 5 million barrels of crude oil had spilled into the Gulf of Mexico.

Under the Clean Water Act, the spiller is subject to penalties of $1,100 per barrel of spilled oil, and $4,300 if gross negligence led to the spill. Under the law, the penalty would be $5.4 billion without proving gross negligence or $21 billion after the government shows gross negligence.

The aggregate amount for resolving all disputes is $4.5 billion with payments scheduled over the course of six years. During the third quarter of 2012, BP posted a $5.2 billion profit, an increase of 40 percent from Q2.

The settlement is a portion of a larger litigation strategy to avoid the proof of gross negligence and drastically increase the penalties that will be levied against the corporation.

The total economic loss for the spill is estimated to be between $35 to $40 billion.

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