BP Owes $192 Billion for Gulf Oil Disaster, Not $15
Billion Settlement It's Seeking
by Antonia Juhasz
On Friday, the Financial Times reported that BP is
hoping to reach an agreement with U.S. authorities
which would require it to pay under $15 billion to
settle all criminal and civil penalties arising from
the 2010 Gulf oil disaster. The Department of Justice
is reportedly seeking $20 to $25 billion. Negotiations
between the DOJ and BP are accelerating and "an
agreement could be reached before the Democratic
party's convention in September," the FT reported.
While $15 billion sounds like a lot of money -- and it
is -- it is a far cry from what BP owes for the many
costs associated with the largest offshore oil spill in
history. To date, a full accounting of exactly what BP
should owe for its crimes in the Gulf has not been made
public. Such an accounting is vital if we are to ensure
that justice and restoration are delivered to the Gulf
Coast and that such a catastrophe never occurs again.
A straightforward application of just the most
pertinent U.S. laws yields a fine of $192 billion. (For
simplicity sake, I only address BP's fines.)
Sound high? Here's why it's not.
Seaman's Manslaughter Statute = $2.75 - $5.5 million
Eleven men died aboard the Deepwater Horizon: Gordon
Jones, Dewey Revette, Jason Anderson, Shane Roshto,
Stephen Curtis, Blair Manuel, Karl Kleppinger, Adam
Weise, Don Clark, Roy Kemp, and Aaron Dale Burkeen.
Title 18 Section 1115 of the U.S. Criminal Code, the
"Seaman's Manslaughter Statute," holds companies,
executives, managers, and employees of vessels liable
for fines and imprisonment for deaths occurring on
their rigs. Simple negligence (not intent) is enough to
secure a conviction. The conclusions of numerous
critical investigations make negligence a forgone
conclusion in this case. Criminal penalties include up
to 10 years imprisonment per violation and fines.
Individual fine: $250,000 per violation x 11 = $2.75
million. Company fine: $500,000 x 11 = $5.5 million.
Clean Water Act: $30.5 billion
Clean Water Act (CWA): "... no discharges of oil or
hazardous substances into or upon the navigable waters
of the United States..." "Hazardous substances" are
"... such elements and compounds which, when discharged
in any quantity... present an imminent and substantial
danger to... including, but not limited to, fish,
4.9 million barrels of oil was released from the
Macondo well, while .8 million barrels were captured at
wellhead, and therefore did not escape into the water.
The CWA imposes a fine of $1,100 per barrel for the
mere act of spilling oil into the water. A spill that
is the result of negligence, as is the case here,
entails a $4,300 per barrel spilled fine is imposed.
4.1 million barrels of oil x $4,300 per barrel = $17.63
500,000 tonnes of gaseous hydrocarbons (including
methane gas) were also released (3 million barrels of
oil equivalent). Just as excessive oil is a hazardous
pollutant, so too is excessive gas which depletes the
oxygen Gulf waters need to support life, such as fish,
shellfish, and wildlife. 3 x $4,300 per barrel = $12.9
Alternative Fines Act (AFA) Dr. David Uhlmann, former
head of the U.S. Department of Justice Environmental
Crimes Section, argues for criminal charges against BP
under the CWA, making BP liable under the Alternative
Fines Act (AFA) to be fined double the losses caused.
Dr. Uhlmann argues for application of the AFA to at
least all economic losses and natural resource damages.
Outer Continental Shelf Lands Act: $37 million
The Interior Department cited BP for 12 violations of
drilling rules @ $35,000 per violation for 87 days =
To calculate fines under the Endangered Species and
Marine Mammal Protection Acts below, I used the latest
data on species deaths provided by the U.S. Fish and
Wildlife Service and the National Oceanographic and
Atmospheric Association, supplemented by "A Deadly
Toll: The Gulf Oil Spill and the Unfolding Wildlife
Disaster," Center for Biological Diversity, April 2011.
I use the latter to provide "multipliers" to account
for estimates of the dead not found versus those
recovered. I apply the highest possible fines, criminal
charges, because this is a "knowing" offense: BP and
its partners took so many risks that they knew such a
disaster might reasonably occur.
Endangered Species Act: $284 million
Approximately 5680 injured or dead endangered or
threatened species, including 100 sperm whales and over
6,000 sea turtles. @ $50,000 each = $284 million.
Marine Mammal Protection Act: $60 million
Data from April 2011 finds 26,000 marine mammals
directly injured or killed. But hundreds more dolphins
have since been found. Applying the standard multiplier
for those impacted but still at sea, 30,000 is more
likely. @ $20,000 fine per impacted mammal = $60
Migratory Bird Treaty Act: $9.4 million
Some 82,000 birds were identified as injured or dead,
including more than 8,200 brown pelicans and 30,000
Laughing Gulls. The species of some 6,000 birds was
unknown, and therefore it is unknown if they are
The Migratory Bird Treaty Act: 73 bird species harmed
by spill are migratory, totaling 18,770 birds,
including nearly 5,000 Northern Gannets, 3,000 Royal
Terns and 220 Snowy Egrets. @ $500 per bird = $9.4
Oil Pollution Act (OPA) = $152 Billion
Under the 1990 OPA, BP is responsible for stopping the
spill; cleaning up the pollution; a Natural Resource
Damage Assessment (NRDA); full environmental
restoration; and full victim compensation.
Natural Resource Damage Assessment: $62 billion ($31B x
2 [AFA]) The NRDA process is underway and we will not
know for decades the full impact of the disaster. Thus,
for numbers, I turn to the National Wildlife Federation
which used the Exxon Valdez settlement as precedent.
Exxon paid $152 (adjusted for inflation) per-gallon of
oil spilled for restoration. $152 x 4.1 million barrels
of oil = $31 billion.
This may be an extreme underestimation. While the oil
carried by the Valdez was heavier and more polluting
and the weather colder and therefore less likely to
allow the oil to evaporate, BP's spill was nearly 20
times larger; impacted five states, each with much
larger populations than Alaska; harmed a much larger,
more fragile, and diverse ecosystem; took place for a
significantly longer period of time; and involved
dramatically more chemical dispersant. Moreover, after
30 years, restoration in the Prince William Sound has
not been achieved.
Economic Loss: $79 billion ($39.7B x 2 [AFA])
Fisheries = $30 billion From 2009 to 2010, in Louisiana
and Mississippi, oyster production fell 55% and 34%,
respectively; shrimp declined in Mississippi by 52%, in
Alabama by 48%, and in Louisiana, by 14%. 2011 data is
not yet available, but, as I reported in the
Progressive Magazine in April, fishers report that
things are getting much worse, with production of some
crops reportedly down by as much as 80% in the hardest
hit areas. The outlook is grim for recovery in the near
term and many experts worry that some species may never
fully recover. In Prince William Sound Alaska, for
example, herring fisheries all but disappeared in the
wake of the Valdez spill.
The Congressional Research Service reports that in
2008, the Gulf commercial fishing industry supported
over 213,000 jobs with related income impacts of $5.5
billion. Additionally, recreational fisheries supported
numerous businesses and spent over $12.5 billion on
durable equipment and trips in the Gulf. Combined, Gulf
seafood and recreational fishing industry = $18 billion
a year business.
I conservatively estimate that just one third of the
industry will be out for just five years = $30 billion.
Tourism = $9.7 billion According to Oxford Economics,
visitors to Congressional Districts along the Gulf
coast spent in excess of $34 billion in 2008,
sustaining 400,000 jobs. In an extensive analysis of
past disasters affecting tourism destinations,
including oil spills, the group estimated in July 2010
(after the well was caped) the possible costs to
tourism at $22.7 billion over three years. It estimates
a cost reduction of $7.5 billion if BP spent $500
million on tourism marketing. BP has spent $179 million
on such advertising. The report, however, overestimates
the tourist areas of Florida impacted by the spill.
Taking these elements into account yields a final
estimate of $9.7 billion over three years.
Economic Loss - Human Health: $20 billion ($10 x 2
More than 21 million people live along the U.S. Gulf
Coast. As I reported in The Nation in May, in the wake
of the disaster, acute health problems have been widely
reported across the Gulf and doctors and researchers
predict a host of chronic ailments. The most common
acute problems are headaches; nausea; respiratory
problems, irritated eyes, nose, throat, and lungs; and
asthma attacks. Others report a "BP rash" of itchy,
peeling, irritated and even burned skin and
neurological effects, dubbed "BP moments," include
dizziness, forgetfulness, and confusion. Extreme health
impacts including excessive bleeding from nose, ears,
breasts, urinary tract, and anal canal; heart
irregularities; and dementia are also reported.
Expected chronic impacts include, respiratory ailments,
developmental disorders for fetuses and children,
neurological disorders, cancers, liver and kidney
disease, and mental health disorders.
The proposed Medical Benefits Settlement with BP
severely underestimates the potential impacted
population and includes just an estimated 200,000
people. It does not, however, include a financial cap.
I estimate the health costs, which are expected to last
for decades, at just one quarter the broader financial
toll: $10 billion.
The Gulf oil spill is the largest ecological disaster
in U.S. history and the world's largest offshore oil
spill. The failures that led to this disaster are not
only endemic of BP, Transocean, Halliburton, and their
other Macondo partners, but they permeate the entire
offshore oil industry, which has pushed beyond its own
technological capacity in pursuit of profit.
Fortunately, we have laws that not only punish these
actions, provide for restoration and restitution, but
are also designed to deter such risky and destructive
activities in the future. If BP is not held to the law,
than the costs of such dangerous operations will
invariably be once again outweighed by the benefits.
Antonia Juhasz is a leading oil and energy analyst who
has written extensively on the BP Gulf oil spill. She
is the author of several books, including Black Tide:
the Devastating Impact of the Gulf Oil Spill (Wiley,
2011). With support from The Investigative Fund of the
Nation Institute, she wrote the cover article of The
Nation in May, "Investigation: Two Years After the BP
Spill, A Hidden Health Crisis Festers." She also wrote
the cover article of the Progressive Magazine in April,
"BP Oil Still Tars the Gulf." She spent much of 2010
embedded within those communities most impacted by the
With research by Lindsey Ingraham and Amit Srivastava.
"Our lives begin to end the day we become silent about
things that matter." Dr. Martin Luther King, Jr.
Antonia Juhasz Oil & Energy Analyst, Author & Activist
Follow on FACEBOOK Twitter.com/AntoniaJuhasz
Author of: BLACK TIDE: the Devastating Impact of the
Gulf Oil Spill. (Wiley, April 2011) A searing look at
the human face of BP's disaster in the Gulf.
"Masterfully reported." - Ms. Magazine; "Both engaging
and Informative." - Mother Jones
THE TYRANNY OF OIL: the World's Most Powerful
Industry--and What We Must Do To Stop It.
(HarperCollins, 2008) Juhasz "reminds us that those who
don't learn the lessons of history are fated to repeat
its mistakes." - USA Today
THE BUSH AGENDA: Invading the World, One Economy at a
Time (HarperCollins, 2006) "One of the crispest, most
insightful books yet to expose the Bush regime." - The
Georgia Straight of Canada; "Spine Tingling." - The
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