BP potential liability could be $69b
16 July 2012
BP potential liability could be $69b
BP Plc faces substantial civil and potentially criminal liability stemming from the 2010 Gulf of Mexico oil spill, which killed 11 rig workers and caused America's biggest offshore oil spill. A rough calculation of those costs, based on estimates from analysts and some previously paid items, could put the total bill at more than $69 billion. That would assume a judge finds BP to be grossly negligent, a contention BP strongly disputes. BP has taken a $37.2 billion charge against its earnings for the spill.
Here is how some of the major costs could break down:
INDIVIDUAL LIABILITY: $14.3 billion
Hundreds of thousands of individuals and businesses have sued BP, with claimants ranging from fishermen and oyster men to hoteliers and restaurateurs to tourist businesses. BP in August 2010 set aside $20 billion to cover damage claims in the Gulf Coast Claims Facility. The facility paid out nearly $6.5 billion on over 200,000 claims, and BP in March agreed to a settlement that commits an additional estimated $7.8 billion for about 125,000 claims. BP has acknowledged that figure could increase, and a U.S. judge must give final approval to the deal.
PERATIONAL RESPONSE: $14 billion
As the responsible party for the spill under the Oil Pollution Act, BP has so far spent $14 billion, including the cost to cap the mile-deep Macondo well, hire hundreds of marine vessels to skim oil slicks and clean up hundreds of miles (km) of oil-soaked shoreline in five U.S. states.
CIVIL PENALTIES: $5.4 billion to $21 billion
The federal Clean Water Act lets the U.S. government seek fines up to $1,100 per barrel of oil spilled. Assuming that 4.9 million barrels were spilled, a fine could reach $5.4 billion. But if gross negligence or willful misconduct is found, the fine rises to $4,300 a barrel. The resulting bill would be $21 billion. Thomas Claps, litigation analyst for Susquehanna Financial Group LLP, has pegged likely Clean Water Act fines at between $7 billion and $10 billion. BP has set aside $3.5 billion to cover Clean Water Act violations.
CRIMINAL PENALTIES: $5 billion to $15 billion
Weeks after the rig explosion, U.S. Attorney General Eric Holder took the unusual step of confirming that the Justice Department had launched a criminal probe into the spill. The U.S. government has not filed any criminal charges against BP or its Macondo partners. But in January, Martijn Rats, head of European oil research at Morgan Stanley, put the cost of potential criminal penalties at $5 billion to $15 billion. Thomas Claps at Susquehanna Financial Group estimated criminal penalties at between $5 billion and $10 billion.
ENVIRONMENTAL DAMAGE: $5 billion
The U.S. government is undertaking a multi-year study of the ecological damage caused by the spill in a process called a Natural Resource Damage Assessment. Louisiana bore the brunt of the BP Plc spill's damage - about 650 miles (1,050 km) of its coastline were oiled, versus 174 miles (280 km) in Florida, 159 miles (255 km) in Mississippi and 90 miles (145 km) in Alabama. It could be years before the damage assessment is complete, and coastal states could choose to settle in the meantime. Morgan Stanley's Rats pegged the cost of environmental damage and recovery at $5 billion. Some Gulf Coast state officials have criticized that figure as too low. ( C) Reuters
Disclaimer for Business News
The Business News is provided for information purposes only and comes from Business World. It is provided solely as a convenience to you and not as an endorsement or approval by us of the content thereof. KBC Bank Ireland can not guarantee the accurateness and completeness thereof. KBC Bank Ireland does not accept any liability or responsibility for the content of and/or any opinions expressed therein (including but not limited to liability arising out of any allegation that the content of or the information contained therein infringes any law or the rights of any person or entity).
