BP Settles Deepwater Horizon Disaster Criminal Charges for $4.5 billion, Funding Headed to Louisiana for Restoration

Nov. 15, 2012 – BP, the U.S. Department of Justice and the Securities and Exchange Commission (SEC) have agreed on a settlement of criminal charges associated with the oil company’s negligence in the 2010 Deepwater Horizon Disaster and oil spill. BP has pleaded guilty to criminal charges and agreed to $4.5 billion in fines, more than half of which will be dedicated to restoration efforts in Louisiana and the Gulf Coast, according to U.S. Attorney General Eric Holder.

“… Under the terms of the agreement we announce today, about $2.4 billion of the criminal recovery funds will be dedicated to environmental restoration, preservation, and conservation efforts throughout this region – including barrier-island creation and river diversion projects right here in Louisiana,” Holder said.

A Department of Justice fact sheet released today notes that $1.2 billion of the $2.4 billion marked for restoration will be dedicated to coastal rehabilitation in Louisiana.

The overall fine of $4.5 billion is for criminal charges only, and does not include civil penalties, which remain to be settled between BP and the Justice Department. Today’s action is independent of pending civil fines associated with the Clean Water Act (which will be distributed in line with the RESTORE Act) and Natural Resource Damage Assessment (NRDA) process. CRCL expects those fines to be much more than the $4.5 billion levied against BP today.

Pending court approval, today’s criminal penalty is a record in the United States for a corporation, exceeding the $1.3 billion that Pfizer paid in 2009 as a result of fraud charges.

The breakdown of the BP criminal fine is as follows:

• Criminal fines to the Justice Department: $1.25 billion over five years
• Fines to the SEC: $525 million over three years
• Restoration funding to the National Fish & Wildlife Foundation: $2.4 billion
• Research funding to National Academy of Sciences: $350 million

Also part of the agreement: BP will plead guilty to 11 felony counts related to the deaths of 11 workers in the explosion of the Deepwater Horizon oil rig. BP will also plead guilty to a felony charge of obstruction of Congress, and misdemeanor charges associated with violations of the Migratory Bird Treaty Act, and the Clean Water Act.

In a press release on BP’s web site, company representatives addressed the issue of the forthcoming civil fines associated with the Clean Water Act and NRDA.

“We believe this resolution is in the best interest of BP and its shareholders,” said Carl-Henric Svanberg, BP’s Chairman. “It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims.”

Bob Dudley, BP’s Group Chief Executive said, “As we move forward, we are preparing to defend ourselves in court on the remaining claims. We are open to settlements, but only on reasonable terms.”

CRCL’s Take:

Today’s settlement is a monumental step forward for the restoration of Louisiana’s coast. Attorney General Eric Holder’s announcement that more than half ($2.4 billion) of the total criminal penalty levied against BP will be directed toward Gulf Coast restoration confirms that the Justice Department has the long-term health and sustainability of Louisiana’s coast in mind during the BP settlement negotiation process, which is far from over. Holder’s mention that settlement funds will be allocated specifically toward “barrier-island creation and river diversion projects right here in Louisiana,” show that the Justice Department’s decision-making process also reflects several key components of Louisiana’s restoration strategy outlined in the Louisiana’s 2012 Coastal Master Plan. The importance of this plan’s unanimous passage by our Legislature this spring cannot be overstated, as it is clearly being referenced by the federal government when it comes to allocating restoration dollars. Having a coordinated, scientifically sound master plan is an advantage that favors Louisiana when it comes to acquiring funds to achieve our restoration goals. With regard to BP’s statement that it intends to “vigorously defend” against the remaining civil penalties (Clean Water Act and NRDA), we believe BP should spend as much energy searching for ways to live up to its responsibility to restore Louisiana’s coast as it spends defending the interests of its shareholders.