Monday, February 27, 2012

Why BP Should Go On Trial For Gulf Oil Spill

The federal trial to determine accountability and penalties for the BP / Deepwater Horizon oil and gas disaster in the Gulf of Mexico was set to begin in New Orleans this morning, but has been delayed by one week to allow more time for BP, the feds, and other stakeholders to reach a settlement. 

Deepwater Horizon rig sinking on April 22, 2010.
We appreciate that the many businesses and families harmed by this massive industrial accident may want to receive compensation sooner rather than later. A trial and the inevitable appeals would likely stretch on for years, with the outcome uncertain.

On the other hand, a quick settlement is the best outcome for BP, because they may avoid having to pay the higher $4,300-per-barrel-spilled fine for "gross negligence," and would only face the much lower automatic fine of $1,100 per barrel.  Given a total spill of 172 million gallons (4.1 million barrels), that's a very big difference: $4.5 billion instead of $17.6 billion.  Even a company as large as BP, which earned profits of $23.9 billion in 2011, would feel some pain from the gross negligence fine.  And unless they feel real pain, the offshore drilling industry is likely to continue doing business as usual, making another massive deepwater spill a near certainty.

More important than meting out sufficient punishment: there is bipartisan legislation in play called the RESTORE Act that would specifically allocate 80% of the fine to the Gulf states affected by the spill, rather than the general treasury. We assume (optimistically) much of the money would be used by those states to fund social, economic and ecosystem revitalization projects.  If the Act does get passed by Congress, the additional $13.1 billion yielded by a determination of gross negligence could make a huge difference to Gulf communities. 

Most interesting to us: if settlement talks fail and this case goes to trial, we expect federal prosecutors will attempt to paint BP as a "rogue" operator that took unusual risks, to convince the judge that the spill resulted from gross negligence.  BP, to defend itself, will likely claim that their operations, well design, and decisionmaking were not so unusual, and were consistent with industry-wide practices.  To make that case BP will have to present lots of information about the offshore drilling industry as a whole, including the safety record, accidents and near-misses experienced by other companies that we never hear about.  None of the official investigations of the BP / Deepwater Horizon spill looked at the industrywide record, leaving many of us wondering:

Just how risky is modern offshore drilling?

A trial may be the only way to answer that question, so we can make better-informed decisions that minimize the likelihood and impact of the next big spill as industry moves steadily forward with deepwater drilling.

1 comment:

  1. This comment has been removed by a blog administrator.

    ReplyDelete