BP Criminal & Civil Penalties

Criminal Penalties

With BP’s agreement on Thursday to plead guilty to 14 criminal charges and pay $4.5 billion in fines and other payments in connection with its 2010  in the Gulf of Mexico, Gulf Coast politicians are now eyeing a much bigger potential windfall from the company: $20 billion or more in civil pollution penalties for the spill. But the negotiations over those penalties — including which states get the money, how quickly, and what it can be used for — could be more contentious than the talks that led to the criminal settlement.

Under the criminal settlement, $2.4 billion paid by BP will go to environmental restoration, overseen by the National Fish and Wildlife Foundation, a nonprofit organization created by Congress. Projects in Louisiana will get half the money, and the rest will be split among the other gulf states — Florida, Alabama, Mississippi and Texas.

Civil Penalties

 There are two significant varieties of civil remedies to come from the spill:

1) penalties under the Clean Water Act and

2) claims under the Natural Resources Damage Assessment.

Under the Natural Resources Damage Assessment process, which arose out of the Oil Pollution Act of 1990, state and federal agencies total the environmental harm caused by the spill and send the responsible party a bill. All the money is administered by federal agencies and must be spent on environmental recovery. And the penalties, which could run in the tens of billions of dollars in the BP case, are tax-deductible for the polluter.

Payments under this process are directly tied to environmental damages, so a related BP settlement would benefit Louisiana the most, since that state experienced and continues to experience the worst of the spill. For this reason, Under N.R.D.A., 100 percent of the money goes to the gulf for recovery. The drawback is that the assessment can take years, and must be arrived at through findings by different scientists, which can vary widely. The Clean Water Act calls for a penalty based on the number of barrels spilled, with much higher damages to be awarded if the polluter is found to have been grossly negligent in causing the spill. In the past, the money from these penalties, which in the BP case could add up to $21 billion, would go to the United States Treasury.

But in June, Congress passed a law, called the Restore Act, which directed that four-fifths of the penalty money in the BP spill be divided up among the gulf states, to be spent mostly outside federal control.
The passage of the Restore Act required quite a bit of horse trading, particularly in a Congress not known for demonstrations of bipartisanship.

Of the money that goes to the gulf states, 35 percent would be divided evenly among them. About 30 percent of the funds would be divided based on the extent of damage, and another 30 percent would go to creating and carrying out a comprehensive master plan covering the entire Gulf Coast. The other compromise involved what the money could be spent on. (NYT, 11/16/2012)