Penalty Phase of BP Trial Concludes, Steep Civil Penalties Expected

On February 2nd, after two long years of litigation, the final phase of the BP oil spill trial finally saw its last day in court. This last phase—the penalty phase—served as a chance for attorneys representing both sides to argue for reduction or expansion of BP’s potential fines under the Clean Water Act.

Presiding Judge Carl Barbier of the United States District Court for the Eastern District of Louisiana limited the amount of potential fines by potentially billions of dollars when he found the size of the spill to be 3.19 million barrels instead of the federal government’s estimate of 4.09 million barrels. This difference represented up to $17.6 billion in fines.

Despite this, Judge Barbier’s ruling on the merits—that BP was “grossly negligent”—bumped their potential liability far beyond the liability under a finding of ordinary negligence. Specifically, a finding a “gross negligence” opened BP up to a statutory maximum of $4,300 for each barrel spilled.

As BP attorneys argued, Clean Water Act rules mandate that the court assess penalties according to BP’s “ability to pay, steps it took to clean up the spill, and its history of past violations.” In accordance with these guidelines, BP’s attorneys emphasized the current economic hardship faced by BP Exploration & Production Inc.’s (BPXP) by distinguishing them from their parent company, BP. Attorneys for BP stated that the court should consider that a “60 percent drop in oil prices since June has slashed BPXP’s value to about $5.1 billion, down from $16 billion just months ago.” BP also highlighted the relatively short-term nature of damage sustained by the Gulf Coast ecosystem. Considering these facts would be entirely consistent with the calculus provided by the Clean Water Act, attorneys for BP claimed.

In addition to the above rulings and findings, Judge Barbier also accepted an inflation adjustment to the “potential per-barrel fine that may see the maximum penalty increase by more than $4 billion above the statutory limit.” This came at the urging of the Environmental Protection Agency, who has within its sole discretion the ability to institute such a penalty. Attorneys for BP countered by claiming that there was no Notice and Comment period for the EPA to impose such inflation adjustment, however, Judge Barbier noted in his ruling that the Administrative Procedure Act “does not require notice and comment when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contract to the public interest.’”

Attorneys for both parties may submit post-trial briefs through April 24, after which a final verdict is expected.

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