- 11 октября 2012, 21:14
- Business on HuffingtonPost.com
Just after mainstream financial news outlets reported that BP p.l.c. is close to a settlement for the 2010 Deepwater Horizon explosion that killed 11 workers and caused the worst oil spill U.S. history, there is more bad news for BP that could cause its fine to soar tens of billions of dollars.
Sweet Deal for BP Likely Derailed
It was all going so well for BP and it denies being negligent, an important consideration when determining the scale of damages. Under the Clean Water Act alone, the civil fines reportedly range from $5.4 to $21 billion, so BP wants to be at the lower end of the range. Moreover, there are clean-up costs and various lawsuits, so one wants to set a precedent as close to the minimum as possible. If fines could be levied through the Oil Pollution Act, BP could take a tax deduction on the cost. This was shaping up to be a sweet deal for BP despite the fact -- or perhaps because of the fact -- this is an election year.
"Gross Negligence and Willful Misconduct"
But let's not forget the Department of Justice's findings. The picture for BP is horrendous, even if financial reporters have developed amnesia. The DOJ gave examples of "gross negligence and willful misconduct," and a "culture of corporate recklessness." Regarding the interpretation of a pressure test on the well, the DOJ asserted:
That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence.
Pattern of Negligence
If the pattern of negligence outlined by the DOJ weren't enough, Norwegian authorities are "investigating" the circumstances around an oil and gas leak off the coast of Norway. At issue is the safety of BP's production platforms. It raises the issue of whether BP is appropriately maintaining facilities, mothballing facilities that have outlived their useful lives, and training and retraining workers in safety protocols.
New Oil Sheen in the Gulf of Mexico for BP and Transocean Limited
CNN reported a four-mile-long oil sheen near the spot where the Deepwater Horizon rig exploded in April 2010. That's over the Macondo well.
Earlier I wrote: "It's too early to say BP is responsible, but it's appropriate to ask the question, especially since U.S. Senators have petitioned President Obama in a bipartisan letter to make sure the proposed legal settlement with BP is fair and in accordance with the spirit of the RESTORE Act, designed to help the coastal states damaged by the spill."
Well today we know. Coast Guard samples show the new oil sheen matches samples taken from the Deepwater Horizon spill. That puts BP and Transocean on the top of the list for potential costs associated with this new problem.
The gravity of the situation is not yet known. The entire area should be reinvestigated to check for leaks and potential weak spots.
Taken as a whole, there's no reason for the U.S. to give ground to BP when it comes to assessing fines and damages. The difference between the low end of the ranges discussed and the high end of the ranges is in the tens of billions of dollars.
Disclosure: I own puts on BP and a minor position in legacy shares.