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Almost as soon as the Deepwater Horizon disaster was reported in 2010, you could sense the US Environmental Protection Agency had the taste of blood in their collective mouths as it focused on the Big Pockets of BP, almost ignoring as it were the roles of Haliburton and Transocean Deepwater.
Coming up on three three years after the explosion, BP lawyers recently have managed to reach a settlement for health claims resulting from the spill. In another case they are trying to reduce the civil damages that have been brought against them by the EPA.
In the former case, a federal judge in New Orleans has approved the proposed medical portion of a $7.8 billion settlement limited to medical claims related to the oil spill. BP representative Geoff Morrell said, “These settlements are historic resolutions that avoid years of lengthy litigation, and today’s decision by the court represents yet another critical step forward for BP in meeting its commitment to economic and environments restoration efforts in the Gulf and in eliminating legal risk facing the company.” Now BP knows the limit of its liability in this portion of the matter has been capped and it eliminated what could easily have been a lingering and unwieldy chain of claims that not only would cost billions more to settle, but that would become more spurious as time goes on.
In the second matter, BP is appealing to the EPA (what some of us Americans refer to as the Extremely Pernicious Agency) to reduce its claims against BP by as much as $3.4 billion. The EPA estimated that 4.9 million barrels of oil discharged from the well. At a fine of $4,300 per barrel that’s, well, a lot of money — about $21 billion, in fact. BP is appealing for a reduction in penalties because, it claims that it recovered some 810,000 barrels and, therefore should not be held liable for those.
Since the EPA is suing under the auspices of the Clean Water Act (a joke in itself), BP claims that, as far as the 810,000 barrels are concerned, it should not “be penalized for not only trying to do the right thing, but successfully doing the right thing and keeping oil out of the marine environment.”
That certainly sound like a reasonable request, but one should not think that the EPA is a reasonable organization. In fact, they are typically far from it. Experiences with the bureaucrats in the EPA indicate over and over again that these otherwise normal people feel empowered by the mandates and penalties given to them (a typical bureaucratic response) and they are not typically inclined to negotiate.
Let me give you an example. Several years ago the EPA bit its teeth into a small US Midwestern town with a population of about 10,000. They had found that effluent from its waste water treatment plant contained more than the nominally allowable amount of zinc. Not a big surprise for a town sitting in the middle of what was once one of the largest zinc mining sites in America. The citation against the city was that the effluent was emptying into a stream that was used as a drinking water source. It did not matter to the EPA that the zinc level, which was not harmful to humans, in the effluent was significantly less than the levels in the stream into which it flowed. That battle has continued for several years, with costs mounting and no practical or affordable way to remove the zinc. But the EPA fights on for a tiny fish in the stream to which the zinc may be harmful.
I’ve said all that to say this: If the EPA is that ridiculously tenacious, how much more so do you think that they will be with BP — especially since the US Attorney General, Eric Holder, is bent on proving “that BP was grossly negligent in causing the oil spill.” The EPA bureaucrats have been lying in wait to devour BP. It’s going to be a tough battle ahead. BP will have to determine what the cost of the battle to save $3.4 billion is worth it in the end.
BP shares were down in the early afternoon by 2.3 pence to 459.65, still running above its 90-day moving average.
