BP vs. Gulf Coast: It’s Not Settled Yet
This article was reported in partnership with The Investigative Fund at The Nation Institute, with support from The Puffin Foundation.
On March 2, the first agreement in the historic trial against BP and all of the companies responsible for the largest maritime oil spill in world history was announced. The settlement proposal between BP and some 120,000 individuals and businesses includes key provisions long sought by those most economically and physically devastated by the gulf oil disaster. It also entails a number of critical unknowns, with vital details under negotiation for up to forty-five days.
What this settlement does not address, and what may yet go to trial at any time in New Orleans, are all of the charges brought by state governments and the federal government against the companies, including penalties for harm and restoration to wildlife and the environment, Clean Water Act penalties for the 4.9 million barrels of oil and 500,000 tons of gaseous hydrocarbons BP released into the ocean, the determinations of fault and negligence, and potential punitive damages. Judge Carl Barbier is also set to consider potential criminal charges at a later trial.
If the people and places of the Gulf Coast are to achieve full justice and restoration, and if future disasters are to be prevented, the public must remain vigilant in demanding that the unfolding legal process is transparent, fair and rigorous, holding BP and all responsible parties fully to account for their failures and crimes.
What is behind the pressure for a settlement?
There are four factors driving the parties away from a trial and toward a settlement: the “Valdez curse,” Big Oil’s fears, the Obama administration and BP’s bottom line.
After Exxon’s Valdez oil tanker ran aground in 1989, spilling 11 million gallons of crude oil into Prince William Sound, Alaska, the legal suit launched by plaintiffs wound its way through the courts over the course of nineteen years before the Supreme Court reached its decision, during which time more than 3,000 of the claimants died. Exxon whittled a $5 billion judgment down to just $507.5 million, leaving most plaintiffs with little economic support. All plaintiffs facing BP are wary of such an outcome.
For its part, Big Oil has no interest in a trial and has been pushing BP to settle. The 72 million pages of documents and hundreds of witnesses gathered for the trial are likely to reveal damning evidence harmful not only to BP, Halliburton, and Transocean but to every major oil company working in offshore waters today. In my most recent book, Black Tide: the Devastating Impact of the Gulf Oil Spill (Wiley, 2011), I reveal that the kinds of catastrophic errors that led to the explosions on the Deepwater Horizon drilling rig, killed eleven men, capsized the rig and created a three-month-long uncontrollable oil and gas spill are not only endemic throughout the entire industry, they also remain largely unaddressed. It is expected that even more damning evidence not previously made public would come out at trial. A settlement deal, however, would likely seek to require that all such evidence be kept from the public.
Gulf Coast organizations, including Alabama’s Mobile Baykeeper, call for a moratorium on all offshore drilling until the entire industry can prove that its operations are safe. Mobile Baykeeper and the gulf Restoration Network, among others, also call for the establishment of a Citizens Advisory Council to oversee the oil industry’s continued gulf activities.
Evidence presented at trial could also prove damning to the Obama administration. In Black Tide, I document the administration’s failure to adequately hold BP to account for its catastrophic Macondo well operations and the subsequent disaster, as well as the administration’s own role in keeping the truth about the scope of the disaster from the public. Again, it is anticipated that even more damning evidence could come to light at trial.
BP does not hold all the cards. It is the world’s fourth-largest company. But it is, like all of the oil industry, heavily dependent on owning, producing and selling oil to maintain that position. BP is the largest producer of oil and gas in the US Gulf Coast. BP is likely willing to make sacrifices in order to maintain these leases and acquire more. A long, drawn-out trial revealing damaging evidence could renew public calls to cancel or at least curtail these leases. BP also does not want the economic uncertainty of a long trial. Finally, it does not want what could easily be a $60 to $70 billion judgment—the amount I believe it should ultimately be held liable for.
Just the rumors of settlement made BP shareholders downright giddy with excitement. James Bevan, chief investment officer at CCLA Investment Management and a BP shareholder, told Bloomberg television that settlement negotiations were “jolly good news” for BP because the numbers proposed were simultaneously manageable for the company and too large for smaller ones. Thus, rather than act as a deterrent against future disasters, such a ruling would instead price out the smaller companies unable to afford such damages in the event of a disaster, leaving the deep waters to those that can.
When BP released its statement on the March 2 settlement, it too made clear that the numbers were well within its purview and would likely have “no net impact to either the income or cash flow statements.”
How individuals and businesses could gain from the proposed settlement
The March 2 settlement includes several favorable provisions long sought by Gulf Coast residents harmed by the disaster. Most critically, while BP has reported that it expects its total payout under the deal to reach just $7.8 billion, this is just BP’s estimate, designed to make its investors happy. In fact, according to the Plaintiffs Steering Committee, there is currently no cap on the amount that BP could be required to pay.
There are other desirable provisions to allow claimants to recover lost future earnings, to accept claims from those who live by the coast and/or are in the seafood industry that their loss was caused by the oil spill “without further proof,” and a rejection of the standard one-size-fits-all methodology used in class action lawsuits. The Gulf Coast Claims Facility (GCCF) administered by Kenneth Feinberg will also be disbanded, with claims shifted to a court-supervised fund.
Critically, the settlement also allows parties to “opt out” if they do not want to take the settlement, and to pursue their own individual lawsuits against BP.
Another key win for plaintiffs is the inclusion of medical claims in the settlement. This includes a twenty-one-year medical consultation program, a provision that people who do not have physical conditions caused by the spill now but who suffer them later can pursue claims, and $105 million to “improve the availability, scope and quality of healthcare in gulf communities.” Such an outcome has long been pursued by the Louisiana Environmental Action Network, among other gulf groups.
Nonetheless, the GCCF also looked good on paper and also allowed for health claims. It was, however, lambasted throughout the gulf as a dismal failure because, among many other reasons, it failed to pay out a single heath claim because the standard of proof was so high that no one was able to meet it.
Thus, while most gulf community leaders and plaintiffs want their day in court, they are also taking a wait and see attitude toward the settlement, arguing that the “devil is in the details” and the test will be the manner in which these beneficial frameworks are turned into law.
How to ensure that justice is served?
In August 2010, much of the nation turned its attention away from the disaster when the Obama administration announced that “the vast majority of the oil appears to be gone” from the gulf, when in fact the opposite was true. The same sense that all is resolved seems to be prevailing in the media today, when, in fact, the opposite is once again true.
Only when all of the charges have been either brought to trial or settled will we know if BP, Halliburton, Transocean, Cameron and all of the companies responsible for the largest ecological disaster in US history have been duly punished, if the people and places of the gulf are to be fully compensated for their losses, if the full truth of the critical failures that led to this disaster—failures that stretch across the entire oil industry and into the Obama administration—have been both revealed and resolved, and if the fines and penalties are large enough to ensure that such a disaster will never occur again.
The accounting for the Deepwater Horizon disaster is far from over; in many ways, it has only just begun.