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Accountability For The Deepwater Horizon Spill And The Gulf, 4 Years Later

Accountability For The Deepwater Horizon Spill And The Gulf, 4 Years Later

Four years ago this month, BP's (NYSE: BP) Deepwater Horizon oil rig exploded. The accident killed 11 people, injured 17 more and sent oil gushing into the Gulf of Mexico.

For three months, engineers struggled to stop the leak. When they finally succeeded, millions of barrels of oil had poured into the Gulf.

Today basic questions about the spill -- how big it was, the damage it caused and who has to pay whom -- still remain.

How Big Was The Spill?

How many millions of gallons of oil  actually entered the Gulf? The answer depends on who you ask.

The National Oceanic and Atmosphic Administration estimated 4.1 million barrels in its April 2012 assessment of the damage done. Bloomberg reported that, at stage 2 of the civil trial, the U.S. Government said 4.2 million gallons spilled. BP argues that number is "severely flawed and substantially overstated" -- and estimates about 2.5 million barrels of oil entered the Gulf.

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Regardless of the number, the spill is enormous -- the Exxon Valdez spill was "only" about 262,000 barrels, or 11 million gallons. BP's Gulf estimate is more than nine times that.

Still, the difference matters enough to litigate. The size of the spill, and the degree of bad acting involved, determines the size of the civil penalties under the Clean Water Act. Just for having the oil spill, the companies could be charged $1,100/barrel. If they were "grossly negligent", that penalty would rise to $4,300/barrel.

Unless the companies settle with the government, the size of the penalty won't be known until 2015. The relevant part of the trial won't even begin until January 2015, explains the Times-Picayune at

The Criminal Pleas And Pending Cases

In 2012 BP agreed to plead guilty to 11 counts of manslaughter, one count of obstructing Congress and environmental crimes. As part of the plea, BP paid $4 billion in criminal fines and agreed to hire experts to monitor its safety procedures. Simultaneously BP settled with the SEC, paying $525 million for publicly and repeatedly underestimating how much oil was leaking.

Three BP supervisors face criminal charges. Donald J. Vidrine and Robert Kaluz are being prosecuted for involuntary manslaughter for the 11 deaths. David Rainey, a former BP executive, had been facing trial for lying to Congress -- but that is on hold while litigation over the indictment is pursued, the AP reported. Kurt Mix, an ex-BP enginee, was convicted last December on one count of obstruction of justice for deleting messages from his cell phone.

Although the spill is routinely referred to as a "BP" spill, three other companies played major roles in the disaster: TransOcean (NYSE: RIG), Halliburton (NYSE: HAL) and Anadarko (NYSE: APC). A fourth company, Matsui & Co.  was a small investor and has resolved its liability already. Both TransOcean and Halliburton pled guilty to criminal charges.

TransOcean owned and operated the drill rig and has pled guilty to, among other charges, ignoring evidence that the well was unstable while it was being drilled. Taking the plea in 2013, TransOcean paid a $400 million criminal penalty and accepted five years' probabtion. Along with resolving the criminal charges, the deal involved $1 billion in civil Clean Water Act fines.

Halliburton was responsible for the cement that failed during the accident. Reportedly, both BP and Halliburton knew of the cement's instability before the accident. In 2013, one of its managers pleaded guilty to charges relating to its tests of the cement.

Halliburton paid a $200,000 fine and "voluntarily" gave $55 million to the National Fish and Wildlife association, plus it accepted three years' probabtion. As with TransOcean, the deal ended criminal investigations of the company relating to the spill, but not all possible liability.

Anadarko owned 25 percent of the project that included the Deepwater Horizon. Although the company has portrayed itself as a "passive investor," Bloomberg reported on emails that reportedly showed Anadarko pushing to drill even deeper at the Deepwater Horizon, while BP resisted on safety grounds.

Anadarko paid BP $4 billion and gave up that 25 percent when it settled with BP in October, 2011. In exchange, BP dropped its claims against the company and agreed to fully indemnify Anadarko for certain claims. However the indemnification does not reach "fines and penalties", and Anadarko could face civil fines under the Clean Water Act. Anadarko has not faced criminal charges.

State Lawsuits

All five U.S. Gulf States -- Texas, Louisiana, Alabama, Mississippi and Florida -- have sued BP and other companies. Because of these suits, the states are participating in the federal liability trial. While those suits were filed by the states' attorneys general, some state pension funds are now bringing securities fraud claims.

Alison Frankel reported for Reuters that some 20 institutional investors, including the pension funds of Louisiana, Maryland and Texas, brought fraud claims against BP -- because of BP's public statements about the spill in its early days. As Frankel details, these cases may blaze a trail for securities fraud litigation against foreign companies after a Supreme Court decision essentially ended such cases.

Expensive Class Action Settlements

In 2012, BP entered a civil settlement with classes of victims. One part was for health claims; the other was for economic losses. In February of this year, the "medical benefits" part of the class action "settlement" became effective. Up until February, 2015, clean-up workers and people living in certain areas affected by the 2010 spill can file claims.

These class members can get paid for certain health impacts, and receive medical monitoring.

The economic and property loss "settlement" has been an ongoing snafu. That settlement is supposed to cover claims about commercial fishing of all types, economic losses by businesses and individuals, inability to continue hunting and gathering, damages to boats and real property. The total cost of the settlement was not capped, although the part for commercial fishermen of all types was, at $2.3 billion.

BP originally estimated it would cost $7.4 billion, but as claims were filed and disputes over who could file them developed, BP began fearing it would be on the hook for many times that. Multiple rounds of litigation over the settlement ensued, and currently BP has asked the whole Court of Appeals for the 5th Circuit to hear its arguments.

Reuters reported that, even now, victims are deeply divided about the settlement, with some feeling fairly treated and others just the opposite. BP paid some $14 billion "immediate spill response and clean-up operations, including 70 million personnel hours" according to Just a few days ago, the Coast Guard allowed BP to stop "active" clean-ups of the last three miles of Louisiana coastline still in that clean-up phase.That doesn't mean clean-up is over; rather, clean-up efforts will be reactive going forward.

The Damage Remains

While all the lawsuits and settlements sketched above attempt to bring accountability, even justice, in the wake of the spill, the goal is surely elusive. Dollars, and even clean up efforts, cannot undo what's been done. Several features of the spill -- its size, its depth, the enormous use of dispersants, the sensitive nature of the impacted wetlands, the rich wildlife living in and visiting the Gulf -- all mean that predicting long-term environmental impacts is nearly impossible.

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