Cleaning up the legal spill - The Economist

Nov 15th 2012, 23:00 by S.W.

CLEANING up the waters and the shoreline of the Gulf of Mexico after the Deepwater Horizon disaster of 2010 cost BP $14 billion. The British oil giant?s final bill for tidying up the legal entanglements after 4.9m barrels of its oil spewed into the Gulf of Mexico are also becoming clearer. On November 15th BP agreed to pay $4.5 billion over five years to settle all the criminal liabilities resulting from the rig explosion and oil spill. Two employees will also face manslaughter charges over the explosion.

Add the $4.5 billion together with the $6.5 billion it has paid on claims from individuals and businesses that suffered and the $7.8 billion it agreed to cough up to settle further such claims and the bill, excluding clean-up costs, has hit some $19 billion so far. Though the criminal settlement is the largest ever fine levied on a company?dwarfing the $1.3 billion Pfizer forked out in 2009 to settle charges that it illegally marketed one of its drugs?this is not an end to BP?s financial burden. But BP will be breathing a small sigh of relief. In determining that it was guilty of ?felony counts of misconduct or neglect?, the court stopped short of attempting to pin a charge of gross negligence on the firm.

Charges stemming from the federal Clean Water Act allow the government to fine BP between $1,100 and $4,300 for each barrel of oil spilled?another fine of between $5.4 billion $21 billion. But the latter figure would only apply had BP been found guilty of gross negligence. The eventual penalty is likely to sit somewhere in the middle. And BP must still settle federal and state claims for compensation for environmental damage to the Gulf coast states?perhaps $5 billion or more?and private civil claims as yet unsettled.

Yet BP always knew that it had a massive bill on its hands and has been busy selling bits of the company to covers it eventual tab. Investors took the news in their stride. Its share price barely budged even though BP lifted its estimate of the probable final cost to some $41 billion. At least for BP, and those affected by the spill, an end to the legal battles is in sight.

Source: http://www.economist.com/blogs/schumpeter/2012/11/bp-and-deepwater-horizon-disaster

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