Thu November 15, 2012
BP Reaches Plea Agreement Over Gulf Oil Spill
Originally published on Thu November 15, 2012 2:17 pm
NEAL CONAN, HOST:
The British oil giant BP agreed to pay four-and-a-half billion dollars today and pleaded guilty to 11 felonies in connection with the Gulf oil spill, and much more could still be on the way. Two of the company's former employees face possible prison sentences for manslaughter and the death of 11 oilrig workers. And David Rainey - then the head of Gulf of Mexico exploration for BP - has been indicted for lying to federal investigators. Also, the corporation must still reckon with fines under the Clean Water Act, which could add up to many billions more.
You have a question about this deal covers and what it doesn't, give us a call: 800-989-8255. Email: firstname.lastname@example.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.
David Uhlmann directs the environmental law and policy program at the University of Michigan and joins us now from a studio on campus there.
Good to have you with us today.
DAVID UHLMANN: Good to be here today.
CONAN: And I know that you were a previously chief of the environmental crime section at the U.S. Justice Department for seven years. This is an unprecedented oil spill. How is this investigation and this criminal judgment different?
UHLMANN: Well, it is, as you noted already, the largest-ever penalty for any violations, any criminal violations of U.S. law. So it's certainly noteworthy in that respect.
CONAN: And other respects, a corporation pleading guilty to 11 counts?
UHLMANN: Well, a corporation pleading guilty is not quite as unusual as it might seem, although, as you noted, BP's agreed to plead guilty to numerous manslaughter charges, and that is somewhat unusual. We don't usually see corporations taking responsibility for manslaughter. But I don't really think BP had any choice here.
CONAN: Because the evidence was so overwhelming?
UHLMANN: Yeah. The evidence of BP's negligence has been overwhelming since the early weeks and months after the spill began back in April of 2010. And BP all but admitted its negligence as early of September of 2010 when it issued an internal report outlining all the different ways it had done wrong.
CONAN: And the other part of this is that the government, one assumes, wanted to make this penalty so stiff that corporations - even corporations as big as BP - could not say, well, four-and-a-half billion, we'll just write that off as part of the cost of doing business.
UHLMANN: Well, that's an interesting part of today's announcement, Neal, because this is a large penalty, and no one can suggest it's not. But when you look at the penalties BP faced on the criminal side, it's actually relatively modest. BP faced up to twice the losses associated with the Gulf oil spill in criminal penalties, which could have run the numbers as high as 30 or $40 billion. No one expected the actual criminal penalty would be that high, but this is at the low end of the range that people were anticipating.
CONAN: At the low end. Why might that be, do you think?
UHLMANN: Well, you know, one issue for the government is that the criminal penalty is just one part of what BP faces in this case. BP faces criminal penalties, which they have agreed to pay today. They also pay - face billions more in civil penalties. They have to pay billions more in natural resources damages. They've already paid upwards of 15 billion in clean up costs. And they've also agreed to pay approximately $15 billion to victims of the spill.
So the Justice Department might have felt that when you add all that up, BP has paid more than enough, and they could go ahead and agree to a fine in the four-and-a-half-billion-dollar range. You know, again, no one should suggest that's a small fine. It's - there's never been a fine anywhere close to this amount, so it's a record fine. But when you consider all the circumstances, it's actually relatively modest.
CONAN: So - and as you look at all of those things combined, BP has been selling off some bits of the company in order to assemble a fund in order to pay what it anticipated coming down the pike, and those kinds of penalties, those kinds of losses, that's going to be felt.
UHLMANN: Oh, it's certainly felt. I mean, no company, even a company as large as BP, can absorb a 40 to $50 billion hit, which is what BP faces in the Gulf oil spill. I mean, they've already, as I mentioned, paid cleanup costs. They've agreed to pay economic loss claims. So those put them at $30 billion even before they start paying these penalties, and that's just a huge sum for even the largest companies to pay.
CONAN: And we understand, you know, that some of those civil penalties, well, those go to the people who were harmed by this. What about these criminal penalties? Who gets the money from that?
UHLMANN: Well, the government has structured today's plea agreement if it's approved by the court so that most of the money will go back to the Gulf Coast region, and most of the money will be used for environmental restoration projects, which is one of the good aspects of today's plea agreement.
CONAN: Let's get some callers in on the conversation. Our guest is David Uhlmann, the director of the environmental law and public policy program at the University of Michigan, former chief of the environmental crime section at the U.S. Department of Justice. So what does this settlement cover, and what does it not? 800-989-8255. Email: email@example.com. And let's see - we start with Utam(ph). Utam with us from Fremont in California.
UTAM: Hi. Thank you for taking my call, Neal. I've been a regular listener of your program. My question to the guest is: In terms of the quarterly profits of BP, let's say even as an example, for the quarter ending September 30th of this year, how much is four and a half billion dollars? I think it's a small percentage. And if you analyze it, it really turns out to be a pittance.
CONAN: David Uhlmann, is that even - do you know the answer to that, and is it calculated in as part of the penalty?
UHLMANN: Well, ability to pay is always a factor in determining criminal penalties, and I think that's why at least part of why you see a fine here in the billions of dollars. And I don't think it's fair to call it a pittance, but I do think the caller raises an interesting question because one of the features of the deal is that BP gets five years to pay this penalty. That's striking, and I would suggest, inappropriate. Companies are expected - weakly required to pay criminal penalties when they are sentenced, unless they do not have the current ability to pay the penalty. I don't think anyone thinks BP can't pay this penalty. They shouldn't be given five years to do so.
CONAN: Utam, thanks very much for the call.
UTAM: You're very welcome. Bye-bye.
CONAN: And let's see if we can go to Andy. Andy with us from Chico, California.
ANDY: Hi. I appreciate you taking the call. Back when the spill first happened, it seems like we heard about a governmental office or agency that was supposed to be providing oversight inspections of this particular installation and others, and it turned out that they had failed to do so. And my memory could be failing me here. And obviously, BP is responsible for what happened, but what about those individuals in that agency? Have they suffered any consequences, or are they still not doing the work they're supposed to be doing and so getting paid for not working?
CONAN: An agency that turned out - was also in charge of receiving the funds from oil leases, so they have a bit of a conflict of interest. But, David Uhlmann?
UHLMANN: Well, you know, the government had problems here too. There's no doubt about that. And as Neal points out, you had the same part of the government collecting royalties from companies like BP that was responsible for making sure they were doing everything the right way. And the government has taken a number of steps to address that problem. They've split up that office, so there's now separate offices handling each aspect of drilling oversight, and they've also I think done much more to tighten regulation of offshore drilling.
Whether they've done enough is hard to say, but I don't think it's the case, as the caller suggests, that there are people, who were the government, just not doing anything, not doing their jobs. I think there's questions about whether the government agencies had enough resources available to them, and questions about whether there was a conflict of interest and questions about whether they could do more. But this one is on BP, and there's no question that BP and the other companies involved were negligent and are the ones responsible for this spill.
CONAN: Andy, thank you. And the other companies involved, are they going to be facing criminal charges as well? Will they be forced to pay these kinds of - or big fines?
UHLMANN: Well, that's a great question, Neal. Transocean and Halliburton, two companies that are also multibillion-dollar companies, also were negligent, also caused this spill, also could be considered responsible for the tragic worker deaths that occurred on the Deepwater Horizon, and yet, neither company is named today. And it's somewhat curious that the Justice Department would reach an agreement with what everybody agrees is the lead defendant, the number one culprit, and not address number two and number three. Maybe, they'll double-back and pick up Transocean and Halliburton. They certainly should, but it's a bit curious that they didn't do so already.
CONAN: Might - is there anything in this agreement that BP agrees to testify against these other companies?
UHLMANN: Well, you know, the - BP testifying against the other companies is probably not what the government needs. What the government needs is to marshal the evidence it has, and it has considerable evidence against Transocean and Halliburton and negotiate those deals. And frankly, that's, you know, one of the things that's a little bit unfortunate. There's a lot that's unfortunate about the Gulf oil spill, but it's somewhat unfortunate the government didn't move quickly in its criminal case. I mean, we're now more than two years, closer to three years from the spill, and it would have better if the government had moved against Transocean and Halliburton and for that matter against BP long before today.
CONAN: As I understand it, BP is also still liable for fines by - under the Clean Water Act, which refer to penalties per barrel of oil spilled.
UHLMANN: Yes. And I think today's settlement one of the good things it does is it does pave the way for an eventual settlement with BP on both the civil penalties that you referenced, as well as what are called natural resource damages, which is the cost of restoring the environment, healing the wounds that BP caused through its misconduct.
CONAN: And how are we going to know that because listen to some of the experts say we're not going to know that for years?
UHLMANN: Yeah. One of the hardest parts of responding to the spill is figuring out just how much BP should pay for the natural resource damages that it caused. And we may never actually be able to put an accurate figure on the natural resource damages, but BP will pay in the billions, and the question is just how many billions.
CONAN: David Uhlmann is our guest, director of the environmental law and public policy program at the University of Michigan Law School. You're listening to TALK OF THE NATION from NPR News. Let's go next to John. John on the line with us from Houston. We apologize for that hash sound you hear on the air. We'll do our best to get rid of it. But go ahead, David Uhlmann.
JOHN: Thank you. I appreciate it. How can a corporation be treated as a criminal? I don't understand that. That doesn't make sense to me. Thank you.
CONAN: Thanks for the call.
UHLMANN: Well, you know, the Supreme Court of the United States has told us that corporations are people too, and actually, Congress has said that under the environmental laws long before the Supreme Court's decision in Citizens United. So corporations are responsible for the acts of their employees when committed within the scope of the employment for the benefit of the corporation. That's the legal requirement. And the Justice Department has been prosecuting corporations for environmental crimes and other misconduct for decades.
So that aspect of the case is not new, although your caller is right that criminal prosecution of corporations is a little different than criminal prosecution of individuals, since obviously you can't throw a corporation in jail the way you can with an individual.
CONAN: Let's go next to Jack. Jack on the line with us from Billingham, Alaska.
JACK: Hi. Thanks for taking my call.
CONAN: Go ahead.
JACK: Too many questions - do you hear me?
JACK: There's just too many questions to try to address all in one point, but the fist thing that hits me since I'm a fisherman and I've seen the consequences of the oil spill with Exxon out of Valdez is that we started at four and a half billion, and then it went down to 3.3 and then went down to 2.5. And let's see - was that 1989 that happened? And I got settlement last year with the final judgment coming to - the figure dropped down to 1.4, 900 million, 400 million. And I gave up about there, 460 million, and I think they might have settled at 198 million. I don't really know. But I guess...
CONAN: I guess what he's asking, David Uhlmann, is BP going to be able to negotiate this down in later years?
UHLMANN: Well, this...
JACK: Yeah. After five years, that's exactly happened (unintelligible).
UHLMANN: Yeah. I know. That's not what's going to happen here. The $4.5 billion criminal penalty, if it's - if the judge accepts it, if the judge thinks that's a fair and appropriate resolution, that's money that BP will have to pay. What the caller is talking about are the losses that he and other fishermen suffered in Alaska in the wake of the Exxon Valdez, which were terrible losses, but - and took many, many years to pay and weren't ultimately paid in the amounts that folks were hoping to receive.
But the Gulf is different. In the Gulf, BP immediately put up - agreed to pay up to $20 billion in losses. They've already paid out - or agreed to pay out approximately $15 billion. And so, you know, there's no good news in a case like this, but one of the positive, sort of, post-spill developments has been that the people who suffered economic losses from the spill are being made whole.
CONAN: Jack, good question. Thanks very much.
JACK: Yeah. Thank you.
CONAN: And let's see - we can go next to - this is Jo, and Jo is with us from Montrose, Colorado.
JO: Hi. Thank you for taking my call. I listen to your program all the time.
CONAN: Well, thank you.
JO: My question is: What would it have cost BP to have prevented this, to have done...
JO: ...what they needed to do from the get-go to make sure that everybody was safe and that all of the precautions that needed to be in place were in place when they started this project?
CONAN: A better or a redundant blowout preventer, I think, is what we're probably talking about...
JO: There you go. Yes, sir.
CONAN: ...David Uhlmann.
UHLMANN: Yeah. I mean, I think Neal is right that at one level the cost of preventing the spill would have been very modest, and there are some very simple things that BP could have done or that the officials on the rig could have done that might have prevented the spill. Certainly, the blowout preventer is one. There are also were something called negative pressure readings, which were badly read by the people overseeing the operation, and that may be one of the leading causes of the blowout.
Having said that, I think the bigger issue in this case and the bigger issue beyond this case is that BP needed to do more and other companies may need to do more as well to make sure that they're set up and operating in ways that don't put profits before safety, that don't put drilling production ahead of meeting our obligations to be good stewards of the environment. And that's where BP fell down, and that's a much more costly proposition, and something that really needs to happen.
CONAN: Especially if they're drilling in places that are far less accessible than the Gulf of Mexico and off the coast of Alaska, for example. So, Jo, thanks very much for the phone call.
JO: Well, wait just a second. One of other thing I wanted to say is that I think that message should go way beyond BP, should go to lots of environmental issues. Thank you.
CONAN: Thanks very much for the call, Jo. And, David Uhlmann, thanks very much for your time today.
UHLMANN: Happy to be with you, Neal.
CONAN: David Uhlmann, who's now the director of the environmental law and policy program at the University of Michigan. Tomorrow, TALK OF THE NATION SCIENCE FRIDAY, Ira Flatow will take a look at electronic voting and how that went on Election Day 2012. It's the TALK OF THE NATION from NPR News. I'm Neal Conan in Washington. Transcript provided by NPR, Copyright National Public Radio.