BP oil spill trial told it 'put profits over safety'
- 25 February 2013
- From the section Business
BP has been accused of putting profits before safety on the first day of a trial in New Orleans over liability for the 2010 Deepwater Horizon oil spill.
The accusation came from a lawyer acting for the plaintiffs' steering committee, which represents thousands of businesses and individuals.
He told US District Judge, Carl Barbier, that BP executives were most focused on cost-cutting.
The trial could result in the biggest civil fine in history of up to $17.6bn.
BP agreed to pay $4.5bn (£2.9bn) last year to settle criminal charges relating to the spill in the Gulf of Mexico.
It has also paid $7.8bn in a settlement with people and businesses affected.
BP and other oil industry firms are pitted against the Department of Justice and the US states that were affected by the spill.
Mike Underhill representing the Department of Justice said the disaster resulted from BP's "culture of corporate recklessness".
"Despite BP's attempts to shift the blame to other parties," Mr Underhill said, "by far the primary fault for this disaster belongs to BP".
One of the lawyers for the plaintiffs, Jim Roy, said BP had put, "production over protection, profits over safety".
Mr Roy also attacked the rig's operator, Transocean, saying the company's safety official on the rig had received little training: "His training consisted of a three-day course. Amazingly, he had never been aboard the Deepwater Horizon."
He did not spare contractor Halliburton, either, saying it deserved some of the blame for providing BP with cementing of the Macondo well that was "poorly designed, not properly tested and was unstable".
Focus on negligence
The trial will determine the causes of the spill, and assign responsibility to the parties involved, including BP, Halliburton, Transocean, and Cameron, which manufactured the blowout preventer meant to stop oil leaks.
Later, it will determine how much oil actually leaked, which will lead to the calculation of how much the oil companies owe in civil fines.
It is expected to be one of the biggest and costliest trials in decades, featuring a small army of lawyers.
The non-jury trial will unfold in two phases.
The first, which opened on Monday, will focus on the cause of the 20 April 2010 explosion that killed 11 men and released an estimated 4 million barrels of oil into the Gulf over 84 days.
The first witnesses will be heard on Tuesday.
Judge Barbier will then determine whether BP's actions on the oil rig were simply negligent or grossly negligent, which would impose significantly bigger fines on the company.
BP chief executive Bob Dudley has said he firmly believes the company was not grossly negligent.
The trial could last for months, but the risks are so great for BP that it may try to reach a settlement, analysts suggest.
"If they are found grossly negligent it will set the tone on the level of fines BP will have to pay, and the financial consequences will be huge," said Nick McGregor, an oil analyst at Redmayne Bentley stockbrokers.
"So while BP's posturing in public is robust, I wouldn't be surprised if they are aggressively trying to reach for a settlement behind the scenes," he added.
Barrels of oil spilt
Robert Percival, an environmental law professor at the University of Maryland, said: "The risk for both sides is so great - for BP it's their name, reputation and future contracts with the US government. For the US government it's all the resources they're spending on the trial - particularly if BP is not found grossly negligent."
The second part of the trial, set to begin in early autumn, will attempt to determine how much oil was leaked, which would then determine the size of the federal fine.
Under the Clean Water Act, the fines are calculated as $1,100 for every barrel of oil spilt through ordinary negligence to as much as $4,300 a barrel through gross negligence.
The Department of Justice intends to demonstrate BP was grossly negligent, which puts the maximum penalty at about $17.6bn.
Last Wednesday, BP won a ruling that 810,000 barrels of oil captured would not be counted in Monday's civil case, which reduced the potential fine under the Clean Water Act by $3.4bn.
The minimum fine is now about $4.5bn - if BP is charged of simple negligence.
However, on top of that, the Gulf states of Louisiana, Alabama, Mississippi and Florida are demanding an additional $34bn in damages under the Oil Pollution Act, citing uncertainty over the long-term effects of the spill on their coastline as well as economic losses and property damage.
But BP has said it will "defend vigorously" against the claims, saying the methodologies used to calculate them were "seriously flawed".
Once the world's second-biggest oil company, BP has fallen to fourth place among the "oil majors" after selling off billions of dollars worth of assets to set aside money to cover liabilities related to the disaster.
In spite of the looming costs, BP still eked out a profit in the fourth quarter from a year earlier.
And so far BP has done an effective job of restoring its credibility through PR campaigns and providing compensation, analysts said. While the financial impact related to the spill will be huge, it is unlikely that its overall outlook will be damaged.
For example, BP has only been suspended from getting contracts from the Environmental Protection Agency but not the US government, which surprised many lawyers, said Mr Percival.
"Many feel this [suspension] is temporary, and as oil is so fungible there will always be a market for BP," he said.