BP’s Potential Pricetag for Gulf Oil Spill

March 5, 2012

BP Plc struck a deal on Friday to pay an estimated $7.8 billion to settle claims from individuals and businesses stemming from the 2010 Gulf of Mexico oil spill.
But BP and its partners in the ill-fated Macondo well still face substantial charges from possible civil and criminal penalties stemming from the disaster, as well as the cost of long-term environmental cleanup efforts. A rough calculation of those costs, based on estimates from analysts and some previously paid items, could put the total bill at over $65 billion. That would assume a judge finds BP to be grossly negligent, a contention BP strongly disputes. BP has taken a $37.2 billion charge against its earnings for spill-related charges. Here is how some of the major costs could break down:


Hundreds of thousands of individuals and businesses have sued BP, with claimants ranging from fishermen and oystermen to hoteliers and restaurateurs to tourist businesses. BP in August 2010 set aside a $20 billion trust to cover damage claims in the Gulf Coast Claims Facility. The facility has paid out $6.1 billion to date on more than 220,000 claims, and Friday’s settlement commits an additional estimated $7.8 billion. BP has acknowledged that figure could increase.


As the responsible party for the spill under the Oil Pollution Act, BP has so far spent $14 billion, including the cost to cap the mile-deep Macondo well, hire hundreds of marine vessels to skim oil slicks and clean up hundreds of miles (km) of oil-soaked shoreline in five U.S. states.

CIVIL PENALTIES: $4.5 billion to $17.6 billion

The federal Clean Water Act lets the U.S. government seek fines up to $1,100 per barrel of oil spilled. Assuming that 4.1 million barrels were spilled and not cleaned up as the government contends, a fine could reach $4.5 billion. But if gross negligence or willful misconduct is found, the fine rises to $4,300 a barrel. The resulting bill would be $17.6 billion. BP has set aside $3.5 billion to cover Clean Water Act violations.

CRIMINAL PENALTIES: $5 billion to $15 billion

Weeks after the rig explosion, U.S. Attorney General Eric Holder took the unusual step of confirming that the Justice Department had launched a criminal probe into the spill. The U.S. government has not filed any criminal charges against BP or its Macondo partners. But in January, Martijn Rats, head of European oil research at Morgan Stanley, put the cost of potential criminal penalties at $5 billion to $15 billion.


The U.S. government is undertaking a multi-year study of the ecological damage caused by the spill in a process called a Natural Resource Damage Assessment. Louisiana bore the brunt of the BP Plc spill’s damage — about 650 miles (1,050 km) of its coastline were oiled, versus 174 miles (280 km) in Florida, 159 miles (255 km) in Mississippi and 90 miles (145 km) in Alabama. It could be years before the damage assessment is complete, and coastal states could choose to settle in the meantime. Morgan Stanley’s Rats pegged the cost of environmental damage and recovery at $5 billion. Some Gulf Coast state officials have criticized that figure as too low.

(Reporting By Chris Baltimore; Editing by Peter Cooney)

Topics USA Abuse Molestation Pollution Energy Oil Gas

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