BP PLC on Nov. 15 announced resolution of criminal and securities claims by the US government against the supermajor related to the April 2010 deepwater Macondo well blowout, which resulted in a massive spill off Louisiana in the Gulf of Mexico.
Subject to approval by a US federal court, the resolution involves a series of payments that total $4.5 billion over 6 years. BP and the US Department of Justice negotiated the agreement, which includes $1.256 billion in criminal fines. BP also agreed to 5 years’ probation.
The blowout caused an explosion and fire, killing 11 crew members on the Deepwater Horizon semisubmersible drilling rig, owned by drilling contractor Transocean Ltd.
The semi later sank. The deepwater Macondo well, now sealed, was drilled on Mississippi Canyon Block 252. Recently, BP capped and plugged an abandoned piece of subsea equipment known as a cofferdam that was believed to be the source of an oil sheen (OGJ online, Nov. 5, 2012).
BP’s agreement with DOJ stipulates the appointment of two monitors, both with terms of 4 years. A process safety monitor will review, evaluate, and provide recommendations to improve BP’s process safety and risk management procedures concerning deepwater drilling in the gulf.
An ethics monitor will review and provide recommendations for the improvement of BP’s code of conduct and its implementation and enforcement.
BP responds
BP noted it is prepared to “vigorously defend” itself against remaining civil claims. The resolution announced Nov. 15 is expected to add $3.85 billion to the $38.1 billion charge taken against BP’s income as of Sept. 30.
BP’s financial statements as of Dec. 31 will reflect the additional charge, as well as any other adjustments arising during the fourth quarter. BP said it anticipates the cash outflows can be met within its current financial framework.
“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,” said Bob Dudley, BP’s Group chief executive. “From the outset, we stepped up by responding to the spill, paying legitimate claims, and funding restoration efforts in the gulf.”
Remaining claims involve federal civil claims, including those arising under the Clean Water Act, federal and state Natural Resource Damages claims, some private civil claims and private securities claims, some state economic loss claims, and miscellaneous private civil claims pending in other federal and state courts.
“BP believes that today’s agreement is consistent with its legal position that it was not grossly negligent. All the pleas related to the accident itself are based on no more than negligent conduct.”
As of Nov. 15, BP had spent more than $14 billion in operational response and clean-up costs.
BP to pay SEC
Regarding Macondo-related claims from the US Securities and Exchange Commission, BP agreed to a civil penalty of $525 million, payable in three installments over 3 years, and consented to an injunction prohibiting it from violating certain securities laws and regulations.
SEC’s claims are premised on oil flow rate estimates contained in three reports provided by BP to SEC on Apr. 29-30, 2010, and May 4, 2010.
BP agreed to plead guilty to 11 felony counts of misconduct or neglect of ships officers relating to the loss of 11 lives, one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act, and one felony count of obstruction of Congress.
Thirteen of the 14 criminal charges pertain to the accident itself and are based on the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon. BP acknowledged this misinterpretation more than 2 years ago when it released its internal investigation report.
“Today’s agreement is consistent with BP’s position in the ongoing civil litigation that this was an accident resulting from multiple causes, involving multiple parties, as found by other official investigations,” BP said.
The remaining criminal count pertains to two BP communications made to a member of Congress during the spill response about flow rate estimates.
BP agreed to pay $2.4 billion to the National Fish & Wildlife Foundation over 5 years. In addition, BP will pay $350 million will be paid to the National Academy of Sciences over 5 years.
Terms of the plea agreement call for BP to take additional actions, enforceable by the court, to further enhance drilling safety in the gulf. These requirements relate to BP’s risk management processes, such as third-party auditing and verification, training, and well-control equipment and processes.
BP also agreed to several initiatives with academia and regulators to develop new technologies related to deepwater drilling safety.
Companies convicted of certain criminal acts can be debarred from contracting with US government agencies. BP said it has not been advised of the intention of any federal agency to suspend or debar the company in connection with this plea agreement.
BP will continue to work cooperatively with the debarment authority, the company said.
Contact Paula Dittrick at [email protected].