It’s tough cleaning up after an oil spill – especially when it’s the largest one in U.S history.
Between the looming fiscal cliff and salacious CIA scandal(s), it might have been easy to miss news last Thursday regarding settlements from the 2010 Deepwater Horizon oil spill. Although the disaster occurred more than two years ago, the story in the courts is far from over. BP, Halliburton, and Transocean – all companies that had a partial responsibility for some aspect of ownership or operation of the Macondo well – have faced numerous criminal and civil charges. Both the government and private groups seek compensation for the environmental and economic damages resulting from the spill, which killed 11 rig workers, lasted over 100 days, and spilled million of gallons of oil into the Gulf of Mexico – oil that some experts believe continues to slowly leak out to this day.
The latest settlement wasn’t an environmental one: BP agreed to plead guilty to 14 criminal counts, including 11 counts of felony manslaughter, misdemeanor violations of both the Clean Water Act and the Migratory Bird Treaty Act, and one felony count of obstructing Congress. The $4.5 billion total includes $4 billion for criminal charges and a $525 settlement with the U.S. Securities & Exchanges Commission resulting from the fact that the company misled investors by minimizing reports regarding the size and extent of the spill in order to prevent their stock from losing value. If you recall, the spill lasted for over 100 days while BP tried in vain to cap the leaking well and get the situation under control – all time during which they have now admit legally they were reporting intentionally low estimates regarding the amount of oil spilled in order to preserve their public image. This is the second settlement that the company has reached so far in regards to the spill. A $7.8 billion settlement was reached in March with private victims suffering health and economic damages (including small businesses in the Gulf that were impacted).
That’s not the end of the story, though. Still to be decided are the major environmental charges brought against the company under the Clean Water Act for the massive ecological damage. Under the Clean Water Act, there is a cap that to the amount the BP can be fined each day for the spill – unless the government can prove “gross negligence” on the part of the company. Word on the street (that’s what we call news reports from the Department of Justice – they handle all litigation for EPA) is that they intend to do this, which could mean additional fines up to $21 billion for BP. The company also faces private lawsuits from those with BP stock, who claim damages from the devalued stock and loss of public image as a result of the spill.
It’s tough to say whether or not these numbers actually reflect just compensation for the damages incurred by the BP disaster. Total cleanup costs did run almost $41 billion, and the disaster also resulted in a government re-organization within the Department of the Interior regarding permitting and safety regulations for oil rigs in the Gulf of Mexico. While it would be nice to say that Deepwater Horizon was a wakeup call regarding the downside risks of the worst-case-scenario disaster when it comes to deepwater drilling, the disaster didn’t bring about too many changes. In fact, after a short term drop in production, economists and industry experts agree that the Gulf of Mexico is now in better shape production wise than it was before the disaster. Yet the cleanup plan to fully restore the impacted areas of the Louisiana coast will take up to 50 years and cost upwards of $50 billion to complete.
Not to be depressing, but it’s something to think about next time you’re filling up your car, or listening to a pundit on TV talk about high gas prices or claim cost of alternative energy is too high. Maybe the cost of oil is higher than the dollars and cents we pay at the pump – and maybe it’s already higher than we really want to admit.