US court ruling could cut BP's final spill penalty


A federal judge in New Orleans agreed late Tuesday to a stipulation that could reduce BP's maximum penalty under the Clean Water Act in connection with the Deepwater Horizon accident by as much as $3.5 billion.

Under the stipulation agreed to by the Justice Department and BP, and signed by US District Judge Carl Barbier, 810,000 bbl of oil that were captured from the leaking well in the Gulf of Mexico before reaching the ocean won't count toward any potential fines under the act.

The amount of oil that spilled into the Gulf will, along with other factors, determine how much BP pays in fines under the Clean Water Act. If the judge determines BP was "grossly negligent" instead of simply negligent, the company could be subject to fines as high as $4,300/bbl of oil spilled, although other factors will also be considered.

Those determinations will be made during two upcoming trials, one of which is set to begin next week.

The two sides agreed that 810,000 bbl of collected oil "never came into contact with any ambient sea water and was not released into the environment in any way" other than via approved flaring, according to Judge Barbier's order.

Thomas Claps, an analyst with Susquehanna Financial Group, wrote in a note that the order is a "significant pre-trial battle" that reduces BP's "worst case scenario" fines under the act by about $3.5 billion.

"Therefore, according to US Government flow rate estimates of approximately 4.9 million barrels of oil spilled, the "worst-case scenario" of [more than $21 billion] in fines for BP has now been reduced to approximately $17.6 billion, a significant decrease," Mr. Claps wrote.

BP argues the size of the spill is significantly less, and is at most 3.1 million bbl.

Dow Jones Newswires

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