British Petroleum Settlement

History of the BP Oil Spill

Deepwater Horizon, the name given to the oil spill from the British Petroleum (BP)-run Macondo Prospect in the Gulf of Mexico, occurred between April and September 2010. Macondo Prospect is a large area off the coast of the Louisiana that contains large deposits of oil and is thus the site of several oil drills. The oil spill began on April 20, 2010 when an oil platform was engulfed in flames following high pressure methane gas igniting and exploding on the Deepwater Horizon drilling rig. This explosion resulted in the suspected deaths of eleven workers whose bodies were never recovered and injuries to sixteen others. Two days after the explosion, the rig completely sank and an oil leak was discovered shortly thereafter.

The leak continued throughout the summer, releasing an estimated total of between 560-585 tons of crude oil in the Gulf of Mexico. Multiple attempts were made to plug the leak, with the United States government, BP and other entities working together to attempt to prevent further damage to the Gulf of Mexico and Gulf Coast regions of Louisiana, Mississippi, Florida, Alabama and Texas. Intentional burns, containment efforts and attempts to seal the well were made in an effort to protect the wildlife in the region, as well as to reduce the spread of oil. The well was officially sealed on September 21, 2010.

Following the seal, a massive clean-up effort ensued in the Gulf Coast region of the United States. In addition to harming the ecosystem, the spill had a massive impact on the fishing, farming and tourism industries of the region. Human health concerns continue to be a concern for those living in the region into the present due to the contamination of drinking water, seafood and soil.

This oil spill was among the largest in history and in many ways was the largest, depending upon the criteria utilized - it is the largest accidental marine oil spill in recorded history at 4.9 million barrels (roughly 210 million gallons). The largest oil spill in terms of actual tons of oil spilled in North America occurred in 1910 when a pressurized oil well spewed oil in the Midway-Sunset Oil Field in Kern County, California for eighteen months. The largest intentional oil spill in history occurred in 1991 when Iraqi forces set fire to over 600 oil wells in Kuwait towards the end of the Persian Gulf War.

Environmental and Human Impact of the Oil Spill

The April 2010 Deepwater Horizon oil spill, or BP oil spill, had far-reaching and catastrophic environmental effects. According to a 2013 study [PDF] published by the National Academy of Sciences, it is difficult to know the full extent of environmental damage caused by the spill because of the movement of ocean currents and the difficulties of monitoring the great variety of natural resources found in the Gulf of Mexico. In addition to the challenges of every incidence of environmental damage, it is no easy task to assess the damage in economic terms. Furthermore, the National Research Council expressed concern about the unknown environmental effects of products used to clean-up the oil, primarily the massive use of dispersants to break up the oil in the water, on the Gulf's ecosystem. The study, requested by the US Congress, also warned that the environmental impact of the oil spill would exert a substantial impact on the Gulf's economy as well, because many residents of that region relied on the Gulf's varied natural resources for survival.

Some groups have set out to identify specific damage caused by the oil spill. For example, a 2013 study by the National Wildlife Federation (NWF) noted that the Gulf's bottlenose dolphin population was suffering from severe illnesses caused by exposure to the oil spill. The NWF also observed decreases in the population of the Gulf's marine wildlife caused by the oil spill adversely affecting hatcheries and interfering with the aquatic ecosystem's food chain. The Department of the Interior reported similar environmental impacts, including negative effects on waterfowl populations and oyster beds. Scientists that used submersible equipment to study coral located near the Deepwater Horizon site witnessed extensive damage to coral beds caused by the blowout and spill. Environmental group Greenpeace obtained photographs of a dead sperm whale found in the Gulf in the weeks following the oil spill, allegedly killed by the effects of the spill, through a FOIA request.

In addition to the diverse wildlife population, many human residents and industries of the Gulf Coast region rely on the natural resources and suffered from the spill's environmental effects. Fishermen in the region are bringing in reduced hauls of seafood and noticing the reduced populations of commercial seafood species. Some of the seafood brought in by fishermen continues to display notable deformities and has caused concern about the consumption of contaminated food on the human population. Scientists also express concern about the impact of toxic dispersal chemicals used in the Gulf on the human population, especially as humans consume seafood from the Gulf that has been exposed to the toxic chemical's lingering effects. Gulf Coast beaches, a major tourist attraction for the region, periodically suffer from "tar balls" washed ashore after storms. While many of the catastrophic environmental effects of the BP oil spill remain largely unknown, such studies are important for calculating the economic damages caused by the spill attributable to BP.

Spill Litigation and Settlements

The Oil Pollution Act of 1990 passed both houses of Congress by large margins and was signed into law by President George H.W. Bush in response to the Exxon Valdez spill in Prince William Sound, Alaska. It mandates detailed clean-up plans from oil companies and requires monies to be set aside for dealing with potential spills. The requisite funds under this statute formed the basis for the remedies sought by the hundreds of lawsuits filed against British Petroleum over the spill.

BP settled criminal proceedings by entering a guilty plea with the US Department of Justice on January 29, 2013 to 14 criminal counts. The plea deal involved $4 billion in fines and was the largest criminal settlement in US history until the $13 billion settlement by JPMorgan Chase & Co. in November of 2013. The guilty plea with the DOJ involved 11 counts of felony manslaughter for those whom died on the rig. The company also pled guilty to a count of felony obstruction of Congress, a count of violating the Clean Water Act and a count of violating the Migratory Bird Treaty Act. BP set aside $42.7 billion, or about 20% of its 2013 revenue of $242.55 billion for dealing with the aftermath of the Deep Water Horizon Oil Spill, including litigation and settlement costs. It potentially faces an additional $17 billion in fines under the Clean Water Act. The company settled with most private lawsuit plaintiffs in March 2012 before civil trial.

Settlements providing for both property and economic loss and for personal injury authorized by US District Judge Carl Barbier in New Orleans on December 24, 2013 were upheld by the US Court of Appeals for the Fifth Circuit in January 2014. In March 2014, the economic and property damage claims settlement was held by the circuit court not to require claimants to show causation between their loss and the spill. That provision allows for fishermen, farmers, the tourism industry, restaurants, beach towns, hunters and others to collect for lost profits. The Fifth Circuit's ruling ended a temporary injunction of payments that began in December 2013. BP sought a removal of the district court judgment on the grounds of alleged false claims by businesses whose operations were not affected by the spill and exaggerated claims. The basis for fear of fraudulent claims stems from the complications of calculating economic losses that trail the depressed post-Hurricane Katrina era. Establishing a standard to figure out how much past and projected loss if any was caused by the Deep Water Horizon Spill and not Katrina or other intangible factors was a difficult task. BP alleged the terms of their $9.2 billion class action settlement agreement would allow claimants who have not been affected by the spill to collect money.

The entire Gulf Region felt economic fallout from the spill and a vast number of people were affected either directly or indirectly. BP alleged that some of the claimants are fraudulent not because they were not affected in some manner by the spill, but because they do not properly fit into one of the settlement classes. There also existed a point of contention in the fact that the appeals extended claims deadlines, which gave people more time to file. The circuit judges appeared only to look to the terms of the settlement agreement in making their decision. The court held that there are no provisions under the agreement requiring claimants to show a causal relationship between their claims and the spill. The circuit court pointed out the settlement was entered into by BP voluntarily and approved by the district court. A BP spokesman said the company would consider an appeal of the March 2014 ruling, though it was already appealing the ruling from two months earlier.


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Timeline

03/03/2014: Ninth Circuit revived shareholder suit against BP Alaska.

02/13/2014: Ninth Circuit revived shareholder suit against BP Alaska.

01/10/2014: Federal appeals court upheld multibillion dollar settlement for BP oil spill.

10/02/2013: Federal appeals court rejected judge's interpretation of BP oil spill settlement.

01/29/2013: Federal judge accepted BP guilty pleas, approved 4 billion dollar oil settlement.

11/15/2012: Holder announced record 4.5 billion dollar settlement with BP over Gulf oil Spill.

08/26/2011: Federal judge ruled punitive damages available against BP in claims over oil spill.

 ...[more]

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