By TOM FOWLER
The US Justice Department and Gulf Coast states are mulling
offering BP a $16 billion deal to settle civil claims related
to the deadly 2010 Deepwater Horizon incident, according to
people familiar with the discussions.
The settlement offer would cover potential fines owed by BP
under the Clean Water Act and payments under another process
known as the Natural Resources Damage Assessment, or NRDA, the
people said. The fines stem from the massive Gulf of Mexico oil
spill that ensued from the Deepwater Horizon well blowout in
BP's potential Clean Water Act fines could run as high as
$17.6 billion, but the company has argued they would likely be
less than $5 billion. The NRDA payments could also run into the
billions, but they are tax deductible for BP.
BP must be found to have been grossly negligent in its role
leading up to the blowout and spill to receive the highest
penalty. The company argues it wasn't grossly negligent and
prosecutors and plaintiffs have a very high bar to clear to
The potential settlement offer helps illustrate the thinking
of federal and state governments about the largest penalty BP
faces in the wake of the Deepwater Horizon saga, a figure that
has been subject to wildly ranging guesses. But it is far from
certain that even if the offer is made, it will bring the
UK-based oil company closer to a deal.
The first of two
Deepwater Horizon trials is set to begin Monday before a
federal judge in New Orleans.
It isn't clear if the offer has been formally proposed to
BP, which declined to comment. BP said previously it was open
to negotiations but that it was fully prepared to start trial
Monday. The Justice Department, which also stated earlier this
week it was prepared to go to trial, declined to comment as
Federal and state officials met in Washington, DC, last week
to work on terms of a settlement offer and continued
discussions throughout this week, according to the people
familiar with the negotiations.
The people said among the disagreements between the
governments are how much of the fines will fall under the Clean
Water Act and how much will fall under NRDA. A law passed by
Congress would give the states control over 80% of Clean Water
Act fines, while NRDA fines would go to specific wildlife and
natural habitat restoration projects.
Louisiana would likely receive the most NRDA funds since that
state's coast line and waters were most directly affected by
Terms of the offer and settlement discussions could continue
even through the beginning of the trial, the people said.
Tuesday, a judge agreed with BP and the Justice Department
that 810,000 gallons of the estimated 4.9 million gallons the
government has said leaked from the well were successfully
captured by spill-response vessels and shouldn't count against
any future fines.
That ruling effectively reduced the maximum possible Clean
Water Act fines by $3.48 billion.
BP previously agreed to a $4 billion settlement of criminal
charges related to the blowout on the Deepwater Horizon
drilling rig and the ensuing spill, as well as a $525 million
civil settlement with the Securities and Exchange Commission.
Transocean, the owner of the rig, agreed to a $400 million
criminal settlement and $1 billion civil settlement for
violations of the Clean Water Act.
BP says it is eager to fight it out in court, believing past
settlement offers didn't adequately reflect the company's legal
position. In an interview with The Wall Street Journal
this week, BP general counsel Rupert Bondy said of the few
Clean Water Act cases that go to trial, the per-barrel
penalties are significantly less than the maximum
He also noted judges take into account several other factors
when determining penalties, such as a company's efforts to
address the environmental impacts of the spill.
BP has spent more than $14 billion on spill response and
cleanup, paid out more than $9 billion to Gulf Coast businesses
and individuals impacted by the spill, and committed billions
more to environmental restoration and research.
"Facing demands that we believe are excessive, not anchored
in reality or the merits of the case, we are preparing
ourselves to start the trial in one week's time," Mr. Bondy had
Dow Jones Newswires