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Billions on the Line for BP in “Gross Negligence” Determination

BP will attempt to permanently seal the Macondo well on Tuesday, and they may well be able to succeed. The three month-plus ordeal of oil gushing into the Gulf of Mexico could finally end.

What comes next is cleanup, and a determination of damages. Though scientists believe that the Atlantic coast will be spared from oil pollution, the new PR push that the oil in the Gulf has somehow disappeared is just not true. In addition to plenty of patches of skimmable oil all over the Gulf, the use of dispersant – always with the go-ahead from the Coast Guard but well beyond EPA directives – has dissolved the oil but pushed it under the surface, into the water column and into the food supply of the Gulf Coast ecosystem. The dangers remain great.

As cleanup crews and federal agents work to address them, they also must properly determine the total amount of oil spilled and what that means to BP’s bottom line. At particular issue is whether or not BP committed an act of “gross negligence” in the Deepwater Horizon explosion. BP appeared to have admitted as much to top Texas state officials:

“Finally, we note that your letter states: ‘We have not asserted the cap provided under the Oil Pollution Act,'” Perry and Abbott say in reference to BP’s statement it wouldn’t invoke the post-Exxon-Valdez law that limits a company’s spill related liabilities to $75 million. “We read that as an attempt to suggest that BP is voluntarily paying claims associated with the oil spill. The truth is that BP has not asserted the cap because it acknowledged that evidence would reveal that the explosion and resulting spill were the product of gross negligence — which renders the statutory cap irrelevant. We know this because, during a conference call with Gulf Coast attorneys general, BP General Counsel Jack Lynch acknowledged that gross negligence would be revealed as a cause of the explosion that led to the oil spill.”

“Gross negligence” is a key legal term of art. If federal administrators or the courts reveal gross negligence in the explosion, BP’s partners would be off the hook for any fines, and the penalties that the government could impose on BP would quadruple:

If the courts find BP was negligent in activities that caused the Gulf of Mexico oil spill it’s fines could nearly quadruple.

• Per barrel fines under the Clean Water Act

• Without gross negligence: $1,100

• With gross negligence: $4,300

• Size of total fines assuming 55,000 barrel-per-day spill rate

• $5 billion without negligence finding

• $19.6 billion with negligence finding

(via Jed Lewison)

BP has publicly denied telling Texas Gov. Rick Perry and AG Greg Abbott that they were grossly negligent in the disaster, and it’s devolved into a he said/she said. But with the sheer numbers involved, someone will conduct an investigation to this end. And for BP, billions are at stake. Given all that we publicly know, about bad blowout preventers and malfunctioning equipment and procedures used in the Gulf that wouldn’t be allowed anywhere else, I think gross negligence is a pretty safe bet.

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David Dayen

David Dayen