BP to pay record $4.5 billion criminal penalty in Deepwater Horizon spill

02/28/2013 5:12 PM

05/16/2014 8:19 PM

Oil giant BP will plead guilty to misconduct and felony criminal manslaughter for the Deepwater Horizon disaster that killed 11 workers and led to the biggest environmental disaster in U.S. history.

The company agreed to pay a record $4.5 billion penalty in a settlement the Justice Department announced Thursday. Its costs could soar by several billions more as the federal government now pursues a civil claim against the company for violations of the Clean Water Act.

Assistant Attorney General Lanny Breuer said the 2010 rig explosion that led to the release of more than 4 million barrels of oil into the Gulf of Mexico resulted from BP’s culture of “profit over prudence.”

Three individual BP employees face criminal charges, two of them for manslaughter. BP also admitted to obstructing Congress and giving shareholders wrong information.

“As the oil spill continued, BP made a tragic situation worse,” Breuer said. “It began misleading Congress and the American people about how much oil was pouring out of the Macondo well. As BP now admits, in responding to Congress, the company lied and withheld documents, in order to make it seem as though less damage was being done to the environment than was actually occurring.”

A Louisiana grand jury charged the two top BP supervisors on the Deepwater Horizon rig with manslaughter in connection with the rig explosion. The Justice Department said Robert M. Kaluza, 62, of Henderson, Nev., and Donald J. Vidrine, 65, of Lafayette, La., negligently caused the explosion.

“In the face of glaring red flags indicating that the well was not secure, both men allegedly failed to take appropriate action to prevent the blowout,” Breuer said.

A former BP executive who was the company’s second-highest official on the scene for the spill response also is being charged. David Rainey, 58, of Houston, was indicted for obstruction of Congress and lying to law enforcement officials. The indictment alleges he withheld information to make it seem the spill was less catastrophic than it was.

The Justice Department said it was continuing the criminal investigation and pursuing its civil lawsuit alleging BP committed “gross negligence.” The civil suit is scheduled for trial in January, although the government and BP are in settlement talks. BP also could be liable for state claims of natural resource damage and private civil claims.

“This is just one aspect,” Trudy Fisher, executive director of the Mississippi Department of Environmental Quality, said of the criminal penalty. “This is not everything.”

BP chairman Carl-Henric Svanberg pledged on Thursday to “vigorously defend the company against the remaining civil claims.”

The Justice Department emphasized the historic size of the $4.5 billion penalty. But Sierra Club executive director Michael Brune called it a “slap on the wrist” compared to the damage done.

So far, the penalties don’t threaten BP’s fiscal health, said Pavel Molchanov, an energy analyst with Raymond James, a financial services company. BP sold its stake in a Russian energy company for $30 billion in cash.

"BP has no problem paying $4 billion," Molchanov said.

About $2.4 billion of the money will go to environmental restoration and conservation efforts on the Gulf Coast. More than $1 billion will go to the Coast Guard’s cleanup fund and $350 million to development of spill prevention and response efforts.

Molchanov predicted that now that BP has resolved the criminal part of the case, the company has more flexibility in negotiating a settlement to the civil claims.

"BP should be able to take its time with the civil discussions and may be inclined to be somewhat more aggressive in holding its ground that there was no gross negligence," he said.

Some Gulf Coast lawmakers joined environmentalists Thursday in pushing for tough civil fines as the federal government now pursues BP on Clean Water Act violations.

"It’s time to move on to the civil side of things and get Gulf Coast residents every cent they deserve," said Sen. Bill Nelson, a Florida Democrat who co-authored the RESTORE Act. That legislation directs the bulk of civil fines from BP directly back to Gulf Coast communities. The law requires money assessed in the civil fines to go toward environmental and economic restoration in the Gulf.

"People need to remember that this is a very rich company that is basically capitalizing on resources that are in the national interest," said Jacqueline Savitz, deputy vice president of the environmental group Oceana.

"They’re our resources as citizens," Savitz said. "These companies come in, they make a lot of money, billions of dollars, capitalizing on those resources. When it happens, I don’t think we should feel guilty about asking them to pay the full figure. As an advocate for the public, why would we let them come in here and take those risks in our backyard and then not expect them to clean up and pay the consequences?"

BP Group chief executive Bob Dudley said the company’s commitment has been to clean up the spill and pay “legitimate claims.” He said the company is preparing to defend itself in court on the remaining claims.

“We are open to settlements, but only on reasonable terms,” he said.

Dudley said the company apologizes and is taking responsibility. “All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region,” he said.

Mary Perez of the Biloxi (Miss.) Sun Herald contributed.

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