NEW ORLEANS (CN) – The U.S. Justice Department asked a federal judge on Tuesday to impose a fine of no less than $11 billion on BP for its role in the 2010 Deepwater Horizon disaster.
The request came on the opening day of a trial to determine the penalty the energy giant will have to pay for the catastrophe that killed 11 and covered vast stretches of the Gulf Coast with unrefined petroleum.
Steve O’Rourke, on behalf of the United States, said BP should face a steep fine because of the “severity” of BP’s violations that led to the 2010 oil spill.
U.S. District Judge Carl Barbier ruled last week that the amount of oil the discharged into the Gulf of Mexico during the 87-day-old spill was less than the U.S. estimated.
His finding shrank the maximum possible penalty from more than $18 billion to $13.7 billion. O’Rourke told Barbier during opening statements Tuesday to take the whole fine, or close to it, from BP.
On April 20, 2010, BP’s Deepwater Horizon rig exploded 50 miles offshore from Louisiana, Killing 11 workers and unleashing the worst offshore oil spill in U.S. history.
This is the third trial to assess oil spill damages.
Although BP’s response effort to the spill was the biggest in history, O’Rourke said it wasn’t necessarily the best. He said BP was required by law, as the party responsible for the spill, to clean up the mess it made, and that the company is now trying to take credit for not just the work and resources it expended but also for those put forth by the U.S. and five Gulf States affected – Texas, Louisiana, Mississippi, Alabama, and Florida.
“BP XP thinks there are some things that aren’t required by law,” O’Rourke said.
O’Rourke argued in favor of Judge Barbier handing BP close to the maximum or the maximum Clean Water Act fine.
O’Rourke said BP is “modestly important, but not indispensible” to the Gulf of Mexico economy and that many companies would like to come in and take BP XP shares. He also said Anadarko – the company with whom BP owned the Macondo well that blew up during the Deepwater Horizon explosion – is saying companies are “fleeing” Gulf of Mexico oil industry in the wake of the spill and because of the severity of fines imposed, but that “that just isn’t happening.”
Last week, Judge Barbier ruled that 3.19 million barrels of oil were released into the Gulf of Mexico during the oil spill. By his ruling last September that the oil spill happened because of BP’s “gross negligence,” Barbier could impose a fine of as much as $4,300 per barrel (had the judge found BP to have been merely negligent, the fine could have been as low as $1,100 per barrel).
BP has stated over and again that the maximum Clean Water Act fine would total more than BP Exploration and Production (BP XP) is worth. But O’Rourke told the judge not to take BP’s distinctions between BP Plc and BP XP to heart.
“BP XP is run from a group and the BP Plc Board of Directors are at the top,” O’Rourke told Judge Babrier. He said even the BP Board of Directors say they don’t work for BP XP. “Asked in deposition, they all said they work for BP. Some of them don’t know what BP XP is … None of them work for BP XP.”
O’Rourke said testimony in what is projected to be a three week trial will show the judge that BP XP is completely financed by other sectors of BP and that BP Plc is the fifth largest company in the world according to its revenue – $396 billion.
“BP is so big they don’t use banks,” O’Rourke said, “They have their own bank.”
O’Rourke said BP’s total assets for the second quarter of 2014 alone were $315 billion.
“BP says recent decline of oil prices will affect their ability to pay,” O’Rourke said, and told the judge not to believe it.
At the end of his opening statements, O’Rourke listed quickly prior environmental catastrophes caused by BP – among them, Grangemouth, Scotland; Prudhoe Bay, Alaska and BP’s Texas City, TX refinery explosion in 2005 that killed 15 workers and injured another 170 more.
There was “no change in behavior for this company after the four prior plea agreements,” O’Rourke said.
Mike Brock, on behalf of BP, said BP had people all over the world that came out to help with the spill response and that “BP people came out of retirement to help with the response.”
“When you look at what BP XP has done,” Brock said, and listed BP’s cooperation with the Coast Guard as well as $16 billion Brock said was spent on immediate response to the spill in addition to another $34 billion in continued response efforts.
“I think the government is conceding we did a good job in our response,” Brock said.
But he said the government’s position is that “BP XP gets no credit for shutting the well and mitigating damages from the spill solely because ‘that’s what the law requires,'” and it’s just not true.
“BP was proactive and placed no limit on response,” Brock said.
He said BP’s massive efforts put forth a “significant recovery” of the shoreline, and that the last active cleanup formally ended in April 2014 (in Louisiana; cleanup of other coastal areas ended in 2013), but that BP “maintains a firehouse for oil spill response” and is “standing by” to respond to calls of oil sightings.
“We now have a massive amount of data that proves the Gulf did not suffer” as much as we feared, Brock said. “There was no collapse of the ecosystem.”
He said Gulf wildlife are within “their historic numbers.”
Brock said BP plays “a significant role in the Gulf,” where it holds 493 leases – more than any other operator.
Brock said an expert will testify during this trial that “a penalty in excess of $2.3 billion in 2015 would exhaust BP’s projected available funds.”
Judge Barbier interrupted Brock to ask whether the company could do a payment plan.
“Any reason that any penalties can’t be structured to be paid over a certain number of years?” Barbier asked.
Brock said he didn’t know.
“The government would agree to that, right?” Barbier asked, turning toward O’Rourke.
“I am aware of at least one Clean Water Act fine that was payable over time,” O’Rourke said.
Brock said investors would look at a lot of various factors, among them, Clean Water Act fines “where the court has discretion.”
BP XP “did the right thing,” Brock said. “They expended the funds. They did what they promised, and they did it well.”
Brock said he disagreed with the government’s assertion that BP should pay a higher fine because of the severity of the spill.
“I just don’t think in a good world that that should be the policy,” Brock said.
Trial continues Wednesday .
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