By Kevin Allison
LONDON, Sept 5 (Reuters Breakingviews) - Macondo is back. After
March's $7.8 billion settlement with Gulf Coast fishermen and
other private plaintiffs, a deal with the U.S. government over
civil and potential criminal liability for the 2010 Gulf of
Mexico disaster seemed to be in reach for BP. It probably still
is - the two sides are still in talks ahead of a civil trial in
January. But sharp rhetoric in new filings by U.S. government
lawyers is a reminder that the UK oil major faces a tough path
to securing a favourable outcome. The market's reaction - wiping
$5 billion off BP's market value - looks appropriate.
U.S. lawyers say they have emails showing that BP is guilty
of gross negligence in the 2010 explosion on the Deepwater
Horizon rig and subsequent oil spill. It's not a change of
position. But the language is unusually sharp, decrying a
"corporate culture of recklessness" and executives engaging in
behaviour that "would not be tolerated in a middling size
company manufacturing dry goods for sale in a suburban mall".
The decision to quote BP managers' emails, which complain of a
"huge level of paranoia from engineering leadership...driving
chaos" in the days before the spill suggests time hasn't
softened the Justice Department's approach.
The financial stakes are high. BP's $38 billion of
provisions for the disaster includes $3.5 billion to cover Clean
Water Act fines. A finding of gross negligence would raise BP's
financial liability under the act from a potential $4.5 billion
to up to $21 billion.
The new filing was a response to BP's request for final
approval of the $7.8 billion plaintiffs' deal. Having not raised
a specific objection to that settlement, the government may be
keen to signal that it won't be a pushover in its own
litigation. The fact that it's an election year only heightens
the political stakes.
A settlement still looks like the most likely outcome. But
securing a favourable deal just got harder for BP. The hit to
the market cap suggests investors are now anticipating a new
financial hit that exceeds what BP has already set aside for
Clean Water Act fines, but well short of the maximum it could
get done for at trial. That looks like a measured reaction to
potentially more difficult circumstances.
- The U.S. Justice Department has filed court papers
detailing alleged "gross negligence and willful misconduct" by
BP in the 2010 Gulf of Mexico oil spill disaster. The UK oil
major has rejected the charges.
- The filing includes excerpts from BP employees' emails in
the days running up to the disaster. It comes as both sides are
preparing for a January 2013 civil trial that will apportion
blame for the spill.
- The United States and BP are in talks to settle civil and
potential criminal liability for the incident, which killed 11
workers and spilled almost 5 million barrels of oil off the
coast of Louisiana.
- If BP is found to have been grossly negligent, it could
raise its potential fines under the U.S. Clean Water Act from a
potential $4.5 billion in the event of no gross negligence, to a
maximum of $21 billion.
- BP's shares fell just over 4 percent in early London
trading, cutting about $5 billion off the oil group's market
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
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