Gulf Coast Disaster - Wednesday, November 28, 2012 8:19 - 0 Comments

Federal Government Settles Criminal Charges With BP

As has been widely publicized, BP has settled all federal criminal charges with the Department of Justice. The total payments under the settlement will be $4.5 billion. The majority of that money goes to a group of federal agencies which in turn could send it back to the Gulf Coast. As expected, Louisiana will be the biggest beneficiary. When, where and how the money gets distributed remains to be seen, but it should be noted this is just an initial payment on the total amount owed by BP for its role in the catastrophe.

The bigger money yet to come will be in civil penalties BP faces for violations of the federal Clean Water Act and Oil Pollution Act, with estimates ranging from $5.4 billion to $22 billion. The difference depends on whether BP is guilty of simple negligence – at a fine of $1,000 for every barrel of oil spilled – or of gross negligence, which carries a fine of $4,300 per barrel. It is that money which will flow to the Gulf Coast by way of the Restore Act, the federal legislation approved by Congress and signed into law by President Obama in July. According to U.S. Attorney General Eric Holder, the government is in negotiation with BP to resolve all of the civil claims, with a trial set for February in New Orleans.

The $4.5 billion settlement breaks down as follows: $2.4 billion to the National Fish and Wildlife Foundation, which said it will use the money for environmental remediation on the Gulf Coast; $1.3 billion in criminal fines, which could go to the U.S. Coast Guard’s Oil Spill Liability Trust Fund; $525 million to the Securities and Exchange Commission to settle criminal charges that BP misled investors; and $350 million to the National Academy of Sciences, which said it will use the money to establish a new, 30-year program on human health and environmental protection in the Gulf of Mexico.

Exactly how the money will be divided among the states remains uncertain. Much of it will be paid out by BP over the next three to five years. Louisiana, which suffered the brunt of environmental damage from the spill, will receive the biggest share of proceeds from the criminal penalties. I hope the Attorney General will be tough in the negotiations with BP on the civil fines. He should have a very strong position since BP’s conduct clearly rises to the level of gross negligence.