NEW ORLEANS -- BP has announced that it will pay $4 billion in criminal penalties and plead guilty to 12 felony counts and two misdemeanors for its negligence and role in the Deepwater Horizon rig explosion and oil spill in 2010. (read the plea agreement)
A source has informed WWL-TV that families of the 11 men killed in the explosion are having a telephone conference with Justice Department officials at noon. After that, at 1 p.m., Attorney General Eric Holder and other DOJ officials will address the media in downtown New Orleans.
One of the felonies is for obstruction of Congress when BP officials sent communications to Congress that understated the size of the oil spill.
The British oil giant reached an agreement with U.S. Justice Department prosecutors, the company said in a statement. It agreed to pay $1.25 billion in criminal fines, $2.4 billion to the National Fish & Wildlife Foundation, $350 million to the National Academies of Sciences and $525 million in civil fines for violations of securities rules after the spill.
The bulk of the charges related to the deaths of 11 crewmembers on the Deepwater Horizon oil rig, which blew up 50 miles off the coast of Louisiana on April 20, 2010, and sank two days later. BP said its negligence stems from its wrong reading of a key pressure test that showed the Macondo oil well was not structurally sound but was misinterpreted by BP officials. That was just hours before the well blew out and the rig exploded in massive fireballs.
The Justice Department has separately charged three BP employees, Robert Kaluza and Donald Vidrine, (see indictment) and David Rainey, with crimes in the case. A federal grand jury charged Kaluza and Vidrine, the two highest ranking BP officials stationed on the rig, with 11 counts of involuntary manslaughter, 11 counts of seaman's manslaughter and a count of negligently discharging oil under the Clean Water Act for their role in the Deepwater Horizon rig accident. Kaluza and Vidrine were the two BP "company men" stationed on the rig. The indictment alleges that they were "grossly negligent" in misinterpreting the results of a key test shortly before the well blew out.
Both men put out statements through their attorneys saying that they were being made scapegoats for problems that went far above them, to BP officials on shore in Houston who cut corners in designing and sealing the well, before it ever came time to test the strength of the well's cement seals.
BP is taking the position that its agreement with the feds shows that the misreading of the pressure test was just a mistake, suggesting it might not constitute gross negligence. But Assistant Attorney General Tony West said those separate negotiations on civil fines continue. Assistant Attorney General Lanny Breuer also said the criminal investigation is continuing.
That distinction is important because if the Justice Department can prove gross negligence, BP would be hit with billions of dollars more in civil environmental fines. The criminal settlement is separate from any possible settlement of civil fines under the Clean Water Act, which could top out at about $18 billion if gross negligence is proved.
Those are the fines that would be governed by the Restore Act, which dictates that 80 percent be distributed to the Gulf states affected by the spill for environmental protection. But Attorney General Eric Holder said the criminal fines, too, would be distributed to the Gulf states in a similar manner.
BP set aside $38.1 billion to pay for cleanup and damage claims and it said the criminal settlement already caused its costs to surpass its set-aside by about $4 billion. It has only planned to pay less than $5 billion for civil fines, so a finding of gross negligence would set its costs even higher.
“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. We apologize for our role in the accident, and as today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”
Rather than the local U.S. Attorney's Office, a special team from the Department of Justice in Washington led the case against BP. The settlement is the largest ever assessed for criminal misconduct by a corporation, and Attorney General Eric Holder emphasized the historic size of the settlement during his press conference in New Orleans.
Still, environmental groups roundly criticized the $4 billion in criminal fines as a "slap on the wrist" for BP. They are the largest fines in history, about four times larger than the settlement in the Vioxx pill case. They appear to be basically in line with the size of criminal fines in the previous big oil spill.
The 1989 Exxon Valdez tanker spill in Alaska spilled 11 million gallons of crude and Exxon paid a $125 million criminal fine, which would amount to about $225 million today. The BP spill was 19 times larger than that, and the fine is about 17 times larger.