Will the Government Let BP Reduce Its Fines and Penalties for Deepwater?

BP and its contractors face as much as $30 billion in criminal fines and $21 billion in civil penalties for its disaster. But there is precedent for them to avoid much of this.
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Gretna, LA -- As the one-year memorial of British Petroleum's tragic deepwater well blowout in the Gulf of Mexico approaches, federal investigators are gathering evidence to support criminal charges filed against BP and its contractors, as well as civil claims filed for damages to wildlife and public lands harmed by over 200 million gallons of crude oil.

BP and its contractors face as much as $30 billion in criminal fines and $21 billion in civil penalties for its disaster. Yet there is already talk among observers that the fines negotiated between BP and the government will be much lower than the maximum fines and penalties because BP agreed to pay billions of dollars for damage claims and has already paid billions of dollars for the disaster response.

There is already precedent that the federal government is willing to forgive and forget oil spill fines and penalties. This week also happens to be the 22-year memorial of the Exxon Valdez oil spill, which had the dubious distinction of being North America's largest environmental disaster until BP's deepwater blowout offshore of Louisiana.

Some two-plus years after Exxon's tanker wreck in Alaska, a U.S. District Court approved the negotiated settlement among the federal and state governments and Exxon. Under the Criminal Plea Agreement, Exxon was fined $150 million -- and forgiven $125 million in recognition of Exxon's good corporate behavior in responding to its spill.

Good corporate behavior? Oil companies are obligated by law to contain and cleanup spills as part of their operating permits and contingency plans approved by state and federal officials. People expect the government to hold oil companies accountable for promises traded for public trust and operating permits. If there is an "accident," people expect the company to clean up its mess -- whatever the cost -- as well as pay fines and penalties. Anything less is an abrogation of public trust and public duty.

I hesitate to use the word "accident" because neither the Exxon Valdez oil spill nor the BP disaster were accidents. Both were the predictable result of the oil industry's culture of gaming with laws and regulations to shave operating costs and increase profits. This is one big strike against "corporate good behavior."

Another huge strike is the remarkable lack of preparation to contain and control a catastrophic oil disaster. Simply put: in both the Gulf of Alaska and the Gulf of Mexico, the voluminous contingency plans that had been approved on paper didn't work in practice. Words are cheap and cleanup equipment is not, so the oil industry invested heavily in toxic chemical dispersants that conveniently sink oil -- out of sight, out of mind, and it scrimped and bought only the cheapest brands of booms, skimmers, and absorbent material -- and in nowhere near the quantity needed for a large mess.

It is also costly to provide adequate safety training and protective gear for people to recognize, and protect themselves from overexposure to oil and chemical hazards. So BP also scrimped on these costs -- even going so far as to threaten workers with job termination if they wore respirators. Given that in 2010, the health hazards of breathing oil and chemical solvents were well known and understood by the medical community and the oil industry, this strike against corporate good behavior should count as criminal negligence in my opinion.

Further, "cleanup" is not the correct word for what BP did to the Gulf. Dumping over two million gallons of toxic chemical dispersants on top of the oil -- and in coastal waters, while claiming no knowledge of what this would do to sea life, workers, coastal residents or visitors, only made a horrible situation even worse. The dispersants "dispersed" the oil into the sea and the air, making oil more available to wildlife and humans alike. Dispersants made it impossible to clean up the oil in the conventional sense of the word. Strike four.

Finally, BP underestimated spill volume, overstated effectiveness of its dispersants while understating human health and ecosystem impacts, downplayed health risks to front-line workers, especially those at the source, and ignored public health risk. BP continues to ignore what appears to be an epidemic of chemical illness among workers and coastal residents from western Florida to western Louisiana. Small wonder the federal investigators are conducting a criminal probe.

Throwing money around to cover up damages and minimize liability should not count as corporate good behavior. But, since it worked so well for Exxon, it should be no surprise that BP is trying the same ruse.

In Exxon's case, the remaining $25 million in criminal fines (after $125 million was forgiven) was paid to the North American Wetlands Conservation Fund and the national Victims of Crime Fund -- not one dime returned to help restore ecosystems or people impacted by Exxon's spill. Exxon paid an addition $100 million in criminal restitution, which was evenly divided between the state and federal governments and mostly spent on capital construction projects -- not on restoring injured people, communities, or ecosystems.

And, finally, under the civil settlement for natural resource damages under the Clean Water Act, Exxon paid $900 million over ten years. These funds were not inflation-proofed so the actual amount paid was about half of the initial penalty -- an amount that did not have a significant effect on Exxon's earnings or curtail any of its plans. About one-third of civil penalties were spent on ecosystem studies and restoration, while the rest went to capital construction projects, habitat acquisition, administration, and even reimbursing Exxon for its 1992 "cleanup" expenses. (Yes, you read that correctly.) Further, the civil settlement also provided for a $100 million clause to reopen the settlement in the advent of unanticipated long-term harm. However last month, ExxonMobil flat refused to pay additional funds for restoration, claiming the presence of lingering oil -- and lingering harm -- is "not hardly unexpected."

There's one more problem with reducing fines and penalties based on money spent for the disaster response. Exxon recovered at least half, and likely more, of its cash outlay for its spill response through tax write-offs, lawsuits with its insurance companies, and reimbursements. According to The Dallas Morning News, Exxon wrote off more than $2.8 billion for spill-related expenses (resulting in an estimated direct tax savings of $670 million), forced insurers to pick up about $1.2 billion of its cleanup expenses, and was reimbursed another $38 million from its civil penalties. BP will likely use exactly these means to recover its expenses, while at the same time trying to leverage the full amount it spent to reduce criminal fines and civil penalties. Strike six.

The bottom line is that if the American people want BP to be held fully accountable for its irresponsible behavior, then people and organizations should demand that the U.S. Justice Department charge British Petroleum with the maximum criminal fines and civil penalties under law. Otherwise, the governments are likely to forgive fines and forget damage, just like they did after the Exxon Valdez oil spill.

Riki Ott, community activist, marine toxicologist and author of Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill (Chelsea Green, 2008), is co-hosting a national teach-in over the one-year memorial of BP's blowout: www.changingtheendgame.org.

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