BP Wins Approval to Cut Potential Fine by $3.4 Billion

BP Plc won approval of an agreement for the U.S. government to not count 810,000 barrels of oil captured before they became part of the 2010 Gulf of Mexico spill, reducing the potential maximum fine under the Clean Water Act by $3.4 billion.

The collected oil “never came into contact with any ambient seawater and was not released into the environment,” U.S. District Judge Carl Barbier in New Orleans said in an order yesterday, less than a week before trial over the spill begins.

“The U.S. and BP agree that the 810,000 barrels of collected oil are not to be used in calculating the statutory maximum penalty,” he said.

About 4.9 million barrels gushed from BP’s Macondo well off the Louisiana coast, which blew out in April 2010, according to the government. BP captured 810,000 barrels directly from the broken wellhead, piped it to the surface and either shipped it to shore or burned it off by flares, according to BP’s court filing.

Under the U.S. Clean Water Act, polluters face a penalty ranging from $1,100 to $4,300 for each barrel spilled, depending on a variety of factors, including whether the polluter acted in a grossly negligent or reckless manner in causing the spill.

Yesterday’s agreement reduces BP’s potential maximum civil pollution fine from about $21 billion to about $17.6 billion, depending on whether the company is found at the trial beginning next week to have been grossly negligent.

Non-Jury Trial

Barbier has scheduled a non-jury trial to begin Feb. 25 to determine liability for the spill. Barbier will hold a separate non-jury trial, set to begin in August, to determine the volume of the spill and evaluate the company’s efforts to stop it.

BP said yesterday in a statement that it will defend itself at next week’s trial after failing to reach a settlement with the U.S. and individual states.

“We have always been open to settlements on reasonable terms,” Rupert Bondy, group general counsel at BP, said in the statement. “Faced with demands that are excessive and not based on reality of the merits of the case, we are going to trial.”

BP said it won’t be found grossly negligent.

“Gross negligence is a very high bar that BP believes cannot be met in this case,” Bondy said. “This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent.”

The U.S. sued BP and Anadarko Petroleum Corp., as co-owners of the blown-out well, and Transocean Ltd., owner of the Deepwater Horizon rig that drilled the well, for civil pollution fines, spill cleanup costs and natural resources damages.

Transocean’s Approval

Transocean won court approval of its $1 billion settlement with the U.S. of pollution claims stemming from the explosion aboard the drilling rig that killed 11 workers and the subsequent spill.

Transocean said last month that it would pay $1.4 billion, including a $400 million criminal penalty, to settle federal claims it violated the U.S. Clean Water Act. Barbier approved the $1 billion civil portion yesterday.

Transocean also agreed to plead guilty to one misdemeanor count of violating the Clean Water Act. U.S. District Judge Jane Triche Milazzo last week gave final approval to the plea at a hearing in New Orleans.

In November, BP reached a settlement with the U.S. Justice Department of all criminal charges stemming from the spill. That plea deal included a $4 billion criminal penalty and a related $525 million settlement with U.S. securities regulators over BP’s misrepresentation of the size of the spill.

Captured Oil

BP and the U.S. decided to continue disagreeing about whether the flaring of the captured oil resulted in any air pollution.

Wyn Hornbuckle, a spokesman for the Justice Department, declined to comment on yesterday’s order.

Scott Dean, a spokesman for London-based BP, didn’t immediately respond yesterday to a request for comment on the ruling.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

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