HOUSTON--BP Exploration and Production Inc. has agreed to pay $4.5 billion to
settle federal charges stemming from the Deepwater Horizon explosion and oil
spill in the Gulf of Mexico in what the Justice Department called the largest
resolution of a criminal case in U.S. history (United States v. BP
Exploration and Production, E.D. La., docket number unavailable, plea
The settlement requires BP to pay a fine of $1.25 billion and make $2.7
billion in additional payments for environmental restoration projects and
research. The company also must undertake a number of safety-related reforms,
including hiring an independent auditor to conduct safety reviews and an ethics
monitor to enforce the company's code of conduct.
BP also agreed to pay a civil penalty of $525 million to the Securities and
Exchange Commission to resolve charges related to reports on the amount of oil
flowing from the Gulf of Mexico spill that the company filed with the SEC in the
weeks after the accident.
guilty to all charges in a 14-count information
the Justice Department filed in the U.S. District Court for the Eastern District
of Louisiana Nov. 15, Attorney General Eric Holder Jr. said during a news
The charges include 11 counts of felony manslaughter relating to the loss of
11 workers on the drilling rig; one count of felony obstruction of Congress when
the company lied and withheld documents related to the rate of oil leaking from
the Macondo well; and violations of the federal Clean Water Act and Migratory
Bird Treaty Act in connection with the Deepwater Horizon spill.
The settlement resolves only the criminal case against the company, and the
government is still free to pursue a civil complaint. Various sources said civil
penalties could reach $21 billion if the government can prove the company was
A civil trial is scheduled for February 2013. Environmental advocates termed
the criminal fine a “slap on the wrist” and called for vigorous pursuit of the
The BP-operated Macondo well blew out of control in April 2010, spewing an
estimated 4.9 million barrels of oil into the Gulf as the largest U.S. offshore
Thirteen of the 14 criminal charges pertain to the accident itself and are
based on the negligent misinterpretation of the negative pressure test conducted
on board the Deepwater Horizon rig. BP said it acknowledged this
misinterpretation more than two years ago when it released its internal
“This marks both the single largest criminal fine--more than $1.25
billion--and the single largest total criminal resolution--$4 billion--in the
history of the United States,” Holder said at a New Orleans news conference.
“But our work is far from over.”
Holder said he wanted to be “absolutely clear” that the settlement does not
end the government's criminal investigation into the oil spill. Prosecutors will
continue to follow all credible leads and pursue any charges that are warranted,
Under the settlement, BP agreed to take additional actions, enforceable by
the court, to further enhance drilling safety in the Gulf of Mexico. This will
include an independent third-party auditor who will conduct annual reviews to
ensure compliance with terms of the settlement agreement.
The company also will appoint a process safety monitor for four years to
review, evaluate, and make recommendations to improve process safety and risk
management procedures related to deepwater drilling in the Gulf. An ethics
monitor will review and recommend improvement of the oil company's code of
conduct and its enforcement.
The company could still face debarment as a federal contractor--it has major
contracts to supply fuel to the Defense Department--but BP said it has not
received any indication the government will pursue that remedy (see related
BP consented to an injunction that will be filed with the court prohibiting
the company from violating certain U.S. securities laws and regulations. The
SEC's claims are based on oil flow estimates included in three reports BP
provided to the agency during a one-week period within the first 14 days
following the accident.
Both the DOJ and SEC settlements are subject to federal court approval.
BP Group Chief Executive Bob Dudley said in a statement that officials
“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.” From the outset,
Dudley said, BP “stepped up by responding to the spill, paying legitimate
claims, and funding restoration efforts in the gulf.”
In eliminating the possibility of any further federal criminal charges
against the company based on the accident, BP said it has taken a “significant
step forward” in removing legal uncertainty over the oil spill and could now
focus more fully on defending itself against all remaining civil claims.
BP said the settlement agreement is consistent with the company's position in
the ongoing civil litigation “that this was an accident resulting from multiple
causes, involving multiple parties, as found by other official
Separately, DOJ unsealed a 23-count indictment filed in the Eastern District
of Louisiana charging BP's two highest-ranking supervisors onboard the Deepwater
Horizon, Robert Kaluza and Donald J. Vidrine, with manslaughter and violation of
the Clean Water Act.
The indictment charged the supervisors with negligence and gross negligence
because they failed to take appropriate action to prevent the blowout, Assistant
Attorney General Lanny A. Breuer said (see related story).
The grand jury also charged a former senior BP executive, David Rainey, with
obstructing a congressional investigation and making false statements to law
enforcement officials, Breuer said. Rainey served as a deputy incident commander
and BP's second-highest ranking representative at the unified command during the
About $2.4 billion of the criminal recovery funds will be dedicated to
environmental restoration, preservation, and conservation efforts throughout the
Gulf Coast region, including barrier island creation and river diversion
projects in Louisiana, DOJ said. Another $1 billion will go to the U.S. Coast
Guard's Oil Spill Liability Trust Fund to be available for cleanup and
compensation for those affected by oil spills in the Gulf and other areas of the
Additionally, $350 million will be earmarked to the National Academy of
Sciences over five years to aid in the development of modern oil spill
prevention and response technologies, education, research, and training, DOJ
BP also agreed to a term of five years' probation.
Sierra Club Executive Director Michael Brune said the criminal settlement
“lets BP off with a slap on the wrist” after causing the largest oil disaster in
Brune said the oil spill was the result of BP's criminal negligence.
The Sierra Club is working to ensure the remaining civil Clean Water Act and
Oil Pollution Act lawsuits will result in penalties “topping $60 billion, which
better reflects the harm BP inflicted on the Gulf,” Brune added.
Tyson Slocum, director of Public Citizen's Energy Program, called the
settlement “pathetic” and a “weak-tea” punishment that provides “zero deterrence
to BP or other companies.”
Frances Beinecke, president of the Natural Resources Defense Council, called
for “a sizable civil penalty to begin to address the damage that has been done
to Gulf communities.” Beinecke served on the presidential commission created
after the BP Deepwater Horizon oil spill that called upon Congress to pass
stronger laws on offshore drilling.
Rep. Ed Markey (D-Mass.), the ranking member of the House Natural Resources
Committee, said he was pleased with the size of the settlement. He said the
civil penalty in the case could go as high as $21 billion.
“I'm very satisfied with the Justice Department action, and I'm also very
happy that they are going to take this civil action all the way to court,”
Markey said during a news conference on the settlement. “I would hope that in
the end this number would be so large in combination that it would serve as a
significant deterrent to any other oil company ever again engaging in this level
In addition, Markey said a former BP executive lied during closed door
testimony in the weeks following the disaster about the rate oil was flowing
from the damaged well, as the committee and others were still trying to gauge
the response that was needed to the environmental disaster.
“They were deliberately low-balling the number because their liability is
directly tied to the number of barrels of oil that flow into the ocean,” said
Markey, who at the time served as the chairman of the House Energy and Commerce
Committee's Energy and Environment Subcommittee.
“If we had known from the beginning that it was not 5,000 barrels, but 50,000
barrels, or 60,000 barrels, that would have affected the amount of dispersants
that were needed to break up the oil spill, it would have affected the number of
booms and skimmers that were needed in order to collect the oil,” Markey said.
“We would have understood a lot better the futility of the initial actions and
substituted something much more dramatic.”
Furthermore, at a Nov. 15 energy forum, Jack Gerrard, chief executive officer
of the American Petroleum Institute, said he thought it is important “to bring
closure” to the BP oil spill and “move on to lessons learned.”
Sen. John Hoeven (R-N.D.) said the United States needs to “make sure we have
good standards in place” following the spill. However, the standards should not
be so stringent they stifle new investment in drilling operations, he said.
“The key is we do it in a way that empowers more investment in energy,” he
Sen. Joe Manchin (D-W. Va.) said: “The bottom line is you never want these
things to happen. You should be preventing it.”
Sen. Mark Udall (D-Colo.) said a portion of the settlement funds should go to
the Land and Water Conservation Fund. “Let's protect those coastlands. There's a
lot of reasons we could turn this money into something positive,” Udall told the
Sen. Bill Nelson (D-Fla.) said he is “happy that the Justice Department
brought the hammer down on BP and continues to hold them accountable for the
hurt they've caused the people, businesses and environment of the Gulf
“Now that this is worked out, it's time to move on to the civil side of
things and get Gulf Coast residents every cent they deserve,” Nelson said.
Nelson said the settlement does not cover civil damages the federal
government also is pursuing against BP under the Clean Water Act. If the court
finds the company was grossly negligent, the federal civil case could result in
BP being held liable for as much as $21 billion, Nelson said.
The Interior Department has implemented major reforms, but Congress has been
unable to overcome partisan differences and pass offshore drilling legislation
since the oil spill occurred over two years ago.
Rep. Henry A. Waxman (D-Calif.) said BP will face a jury in a civil trial in
2013, “and I'm hopeful that the other companies who played a role in this
disaster will also face appropriate penalties for their actions.”
DOJ's criminal settlement was announced one week after Judge Carl Barbier
held a fairness hearing in the U.S. District Court for the Eastern District of
Louisiana on the tentative $7.8 billion civil settlement BP reached with private
economic and medical loss claimants.
After a one-day hearing with testimony from attorneys representing the
plaintiff's steering committee and attorneys representing parties who objected
to the settlement, Barbier took the matter under advisement.
Barbier had given the proposed settlement tentative approval May 2.
By Susanne PaganoContributing to
this report were Andrew Childers, Lynn Garner, and Ari Natter (Washington, D.C.)
The BP plea agreement is available at http://www.justice.gov/iso/opa/resources/43320121115143613990027.pdf.
The government's criminal information in the case is available at http://www.justice.gov/iso/opa/resources/73920121115143627533671.pdf.
The indictment of Robert Kaluza is available at http://www.justice.gov/iso/opa/resources/2520121115143638743323.pdf.
The indictment of David Rainey is available at http://www.justice.gov/iso/opa/resources/27820121115143658328449.pdf.