BP Says Fine Doesn’t Have to Be Based on Spill Amount

(Corrects description of BP’s legal argument starting in first paragraph of story published April 5.)

BP Plc (BP/) said the U.S. could calculate its pollution fine for last year’s Gulf of Mexico oil spill based on how long the damaged well gushed, not on how many barrels of crude it discharged.

The Obama administration in December sued BP and other companies involved in the worst offshore oil spill in U.S. history, seeking a civil penalty based on the more than 4.1 million barrels of oil it said spilled into the gulf after the Deepwater Horizon rig blew up off the Louisiana coast in April 2010, killing 11 people. The gusher was capped July 15 and permanently sealed Sept. 19.

BP said in a filing yesterday in federal court in New Orleans that the government could assess a fine based on the days the well was in violation of the Clean Water Act, an alternative method to the way the U.S. said it plans to calculate the penalty. The difference amounts to billions of dollars.

In its complaint, the U.S. said it will seek civil penalties of $1,000 for each barrel of oil spilled, or in the case of negligence or willful misconduct, as much as $4,300 a barrel from the companies involved, as provided under the law. London-based BP has denied acting in a way that would trigger the higher per-barrel fine. The company didn’t specify what the penalty would be under its calculation.

Alternative Penalty

The Clean Water Act provides a fine of $32,500 for each day of violation as an alternative to the per-barrel spill assessment, said David Uhlmann, former head of the U.S. Justice Department’s environmental-crimes unit. Laura Sweeney, a department spokeswoman, declined in an e-mail to comment on BP’s filing.

“Where there is such a wide discrepancy between what the per-day and per-barrel fines will be, there is no question that the government will seek fines based on the number of barrels released,” said Uhlmann, who teaches law at the University of Michigan. “Any settlement between the government and BP will be based on the per-barrel fine numbers.”

Calculated by the day, BP’s fine could range from $2.8 million using the date the well was capped to $4.9 million using the date the well was permanently sealed. Calculated by the number of barrels discharged, BP faces a fine ranging from more than $4 billion to as much as $20 billion, depending on the degree of negligence determined, according to figures supplied by Uhlmann.

‘Multiple Billions’

“By BP’s method, we’re talking about a fine in single- digit millions versus a fine of multiple billions” using the government’s method, Uhlmann said.

Anadarko Petroleum Corp. (APC) and MOEX Offshore 2007 LLC, BP’s partners in the well, filed papers late yesterday also denying that they acted with negligence or willful misconduct and repeating their position that BP should pay the full cost of the spill. Anadarko holds a 25 percent stake in the well, and MOEX, a unit of Mitsui & Co., holds 10 percent.

The government is seeking a judicial declaration that BP, Anadarko, MOEX and Transocean Ltd. (RIG), the rig owner, are jointly “liable without limitation” for all cleanup and restoration costs and the pollution fines.

BP has admitted legal responsibility for damage caused by the spilled oil and set aside $20 billion to compensate injured parties and pay cleanup and restoration costs.

BP said in its filing yesterday that it believes other companies involved in the well should share remediation costs and fines, based on the ultimate apportionment of fault for the disaster. The company also said any cleanup and restoration costs the U.S. charges BP should be reduced by whatever sums BP has paid or will pay state governments for those same services.

The case is U.S. vs. BP Exploration & Production Inc., 2:10-cv-4536, U.S. District Court, Eastern District of Louisiana (New Orleans). Yesterday’s filing was in In re Oil Spill by the Oil Rig ‘Deepwater Horizon’ in the Gulf of Mexico on April 20, 2010, 2:10-md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.com; 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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