$4b record fine for BP on fatal well disaster

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This was published 11 years ago

$4b record fine for BP on fatal well disaster

By Emily Gosden

BP HAS pleaded guilty to manslaughter over the deaths of 11 men in the Gulf of Mexico disaster and will pay $US4.5 billion in a record settlement with US authorities.

The explosion on the Deepwater Horizon rig in April 2010 caused the worst offshore oil spill in US history, brought the company to its knees and, after this week's settlement, is likely to cost it at least $US42 billion.

The total bill could rise further if BP is found to have committed gross negligence - a charge that it has always denied - in a civil case that remains unresolved.

BP is to pay $US4 billion in criminal fines and penalties to resolve all criminal claims with the US Department of Justice - the largest criminal settlement in American history.

Total disaster: Fire boats battle the blaze that engulfed the Deepwater Horizon oil platform off Louisiana in 2010.

Total disaster: Fire boats battle the blaze that engulfed the Deepwater Horizon oil platform off Louisiana in 2010.Credit: Reuters

It will also plead guilty to 11 felony charges of manslaughter over the deaths of the men.

The Justice Department said it had also charged BP's two highest-ranking supervisors on the Deepwater Horizon, Robert Kaluza and Donald Vidrine, with manslaughter, negligence and gross negligence.

BP will plead guilty to two criminal misdemeanour counts over the oil spill: one under the Clean Water Act and one under the Migratory Bird Treaty Act.

A 14th guilty plea is for a criminal felony charge for obstructing Congress by lying about the amount of oil leaking from the stricken Macondo well after the accident.

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The department also charged a former senior BP executive, David Rainey, who served as deputy incident commander during the spill, with allegedly underestimating the oil leaking ''to make the spill appear less catastrophic than it was''.

It is thought BP will cover legal fees for its employees.

Announcing the settlement in New Orleans, Assistant Attorney-General Lanny Breuer said the explosion resulted from BP's culture of prioritising ''profit over prudence''.

He said: ''Perhaps the greatest tragedy is that the deaths of the 11 men on board the Deepwater Horizon could have been avoided. As the oil spill continued, BP made a tragic situation worse: it began misleading Congress and the American people about how much oil was pouring out of the Macondo well.''

BP chief executive Bob Dudley said: ''All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf Coast region.

''We apologise for our role in the accident and, as today's resolution with the US government further reflects, we have accepted responsibility for our actions.''

A host of civil claims that could significantly add to the bill for the disaster remain unresolved and are due to be heard at a New Orleans trial beginning in February.

BP chairman Carl-Henric Svanberg said the resolution was ''in the best interest of BP and its shareholders''.

He added: ''It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims.''

BP told analysts it could have faced far greater criminal charges if it had not settled.

Analyst Peter Hutton, at RBC Capital Markets, said the deal was a ''significant step'' for BP because it removed the ''largest non-estimable liability and risk of criminal indictment''. It also showed a willingness to settle by both sides.

However, he warned that he expected BP to have to increase its total provisions for the spill, by as much as $US9 billion, as remaining matters were resolved.

Mr Hutton said the maximum penalties under the Clean Water Act could be $US21 billion but he suggested that BP's was likely to achieve a resolution for less than that.

BP is close to achieving a $US38 billion target of divestments to help pay for the spill. Its share price remains about one-third below the level before the disaster.

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