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October 01, 2012

BP Haggling With Government Over Penalty for Deepwater Horizon Oil Spill

Posted in: BP oil disaster

The US government has still not reached a settlement with BP over the Deepwater Horizon oil spill in 2010, though talks continue.

The issue concerns an upcoming lawsuit over violations of the Clean Water Act. A ruling that BP acted with “gross negligence” in their role in the disaster in the Gulf of Mexico triples the damages for the company, which is based on the amount of oil that spilled out of the well. This would come to roughly as high as $25 billion. The most precise figure we have is that 4.9 million barrels, or 205.8 million gallons, poured into the Gulf.

That suit is scheduled to begin early 2013. Meanwhile, talks had been progressing to avoid a trial and reach some settlement figure. But the government has not been willing to budget below $18 billion from BP, who refuses to pay that amount.

Talks between BP and the U.S. government over a settlement for the 2010 oil spill have stalled because the U.S. is insisting that the British oil giant pay at least $18 billion, British newspaper the Sunday Times reported.

A settlement deal may not happen until early next year, the newspaper quoted sources close to the company as saying.

A settlement between $18 billion to $21 billion is near the level which BP would be required to pay should it be found grossly negligent under the Clean Water Act, said the paper.

In July, BP floated a figure as low as $11 billion to cover all outstanding fines and penalties, and tried to target a compromise position at around $15 billion. Also back in July, the government reportedly demanded as high as $25 billion in a settlement.

So while this makes it sound like the government has been holding firm to the low end of Clean Water Act exposure, they actually appear to have come down $7 billion already in a few months, and the trial isn’t scheduled until early next year. BP’s board appears to be the stubborn ones; they want a $15 billion settlement and won’t meet the government at $18 billion, so everyone can claim some manner of victory.

This will play out over the next couple months. 80% of the money that the government does receive from BP will go toward Gulf Coast states, per the recently passed RESTORE Act.


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