Five Things to Know About the Latest BP Gulf Oil Spill Trial
One should be forgiven for losing track of the never-ending legal warfare over the April 2010 Gulf of Mexico oil spill. With lawyers swinging back into action in federal court in New Orleans this week, here's a cheat sheet for sorting through the jurisprudential muck.
This case concerns BP's liability under the Clean Water Act. In earlier stages of a Justice Department lawsuit, U.S. District Judge Carl Barbier blamed the company's "gross negligence" for the eruption that killed 11 rig workers and spewed more than three million barrels of crude along the Gulf coast, from Louisiana to Florida. Now Barbier, acting without a jury, will apply a series of eight factors identified by the act to determine the pecuniary penalty. The potential price tag could range from several billion to nearly $14 billion.
What are those factors? They include such considerations as the seriousness of BP's violations (pretty darned serious, given the gross negligence finding), the scope of the company's attempt to "mitigate" the spill once it occurred, and the economic impact the penalty will have on BP. There are others, but the opposing sides will probably focus most heavily on those three. The government is going to stress punishment and deterrence: An example must be made of BP so that major oil companies act much more cautiously in the future. BP will emphasize its attempt to contain the spill once it was underway. Look for crucial evidence from Coast Guard officials who worked with the company in the spring and summer of 2010. Will those officials bolster BP's case or that of their fellow federal employees at the Justice Department? "Based on the evidence to be presented and the application of the eight statutory factors, [BP] should be subject to a Clean Water Act penalty at the lower end of the statutory range," argues J. Andrew Langan, a partner with Kirkland & Ellis, BP's main outside law firm.
Wait, what was that about the economic impact on BP? Why does that matter? A corporate polluter that is solvent is in a better position to clean up after itself. At least that's one of the ideas behind the Clean Water Act. Counterintuitive as it may seem, BP will have a chance to put on evidence that the recent slide in oil prices has hurt its bottom line, and therefore it ought to face less punishment. That doesn't sit well with environmentalists. "The Clean Water Act is about deterrence," asserts Steve Cochran, director of the Environmental Defense Fund's Mississippi River Delta Restoration Project. "Think of someone caught speeding at 150 miles per hour through a school zone. He gets a ticket. There's a price for that so he doesn't do it again." Judge Barbier has wide discretion in deciding how to resolve the tension in the act between propping up a corporate wrongdoer and slapping it down.
This trial won't provide the proverbial closure on the Gulf spill. BP has already paid out some $28 billion in cleanup costs and claims. Apart from the Clean Water Act case, the company is tussling with plaintiffs attorneys over private business and economic claims that ultimately could add $10 billion or more to the tab. And there's an entirely separate federal legal process called Natural Resource Damage Assessment. The NRDA (pronounced NER-duh) sets a price on ecological restoration. BP has already promised a $1 billion NRDA down payment. But the government officials who are studying the toll on the environment—and are expected to continue to do so for another year or more—will demand that BP chip in much more than that. Guestimates of the ultimate NRDA bill range from $5 billion to $20 billion. BP will object to the amount. The federal government will file a whole new lawsuit seeking to enforce the full NRDA. Hello again, Judge Barbier.
Oy, so what's the time frame here? The latest phase of the Clean Water Act case is set to last three weeks, with post-trial briefs due in late April. Barbier will rule some time after that, presumably this year. The company's feud with private plaintiffs' lawyers will continue indefinitely. No one has a realistic projection on how long the NRDA phase might last. So far, BP has taken $43 billion in charges to cover all its Gulf spill liability. It'll be a while before we know whether that's enough.