BP OIL SPILL - My LIUCmy.liuc.it/MatSup/2015/A86039/corporatelezione5-2016.pdfUS report of September...

Donatella Porrini [email protected]

1

6 April, 2016 LIUC COURSE:

CORPORATE CITIZENSHIP FOR GLOBAL FIRM

BP OIL SPILL

THE ACTORS Deepwater Horizon

Builder: Hyundai- 2001

Owner: Transocean

Leasee: British Petroleum

LOCATION •  GULF%OF%MEXICO%%%%%%80Km%from%Louisiana%%•  One%of%the%biggest%drill:%%%around%9000%barrels%of%oil%%per%day%

LOCATION

•  20%April,%2010%G%EXPLOSION)

THE FACTS •  11 Casualties •  17 injured

•  22 April, 2010 -deposited on the seabed

OIL SPILL

CLEAN-UP ATTEMPTS Over 30,000 people

Floating booms

Controlled burns

Skimmer ships

Dispersant to break up the oil

•  Remote%controlled%machines%•  Containment%“Dome”%(a%capping%device)%•  “Top%Kill”%approach%(pumping%heavy%fluids% in%the%blowout%preventer)%

•  15%July%–%temporary%cap%•  3rd%August%–%“StaXc%Kill”%operaXon%(mud%and%cement%injected)%

•  19%September,%2010%–%well%officially%“dead”%%

STEM ATTEMPTS

•  106%days%long%leak%•  More%than%4.9%million%barrels%•  11,300%miles%–%distance%covered%

OIL SPILLED

•  102: school gymnasiums filled floor-to-ceiling

by milk jugs lined up side by side - farther than New York to Buenos Aires and back

DAMAGE EVALUATION

DAMAGE EVALUATION Ecology%%

Fisheries)

Tourism%%

Health)

Economy%%

AN UPDATE OF THE SITUATION

Administration: • fast to reorganize the criticized Minerals Management Service; two agencies established, BOEMRE and BSEE • asked for more funds to help the authorities to carry out their job

Offshore drilling industry: • introduced tools to contain a high-pressure blowout in deep water • Not yet the creation of an independent safety institute that will focus on safety

US Congress: • It has introduced just the RESTORE Act (80 percent of the fines used for environmental and economic restoration projects) • should increase the financial responsibility and the liability cap requirements for offshore facilities; raise the Oil Spill Liability Trust Fun’s limitation

•  In order to increase the effectiveness of ex-ante regulation in the oil industry, we propose the introduction of some new regulations:

EX-ANTE IMPROVEMENTS

•  BUILDING PROCEDURES

•  DRILLING OPERATIONS

•  SAFETY REVISIONS

EX-POST REGULATION

EX#POST#REGULATION#SCHEME 1.   FIRM,#INJURER,#POLLUTER:#BP#2.   CAUSALITY:# environmental# pollu0on,# oil# spread# in#

waters#and#on#lands 3.   EVENT:#oil#spill,#an#accident 4.   DAMAGE#EVALUATION 5.   DAMAGE#EVALUATION#EFFECTS#AND#TIMING 6.   VICTIMS:#individuals,#society,#animals,#environment##

EX-POST REGULATION The Oil Pollution Act of 1990 (OPA 90) should be considered. 3 different principles at the heart of the law : 1.  Strict liability: parties responsible for oil spills are considered strictly

liable for damages caused even if they have not acted in a negligent way ! BP

2.  Channels liability: companies should exactly specify who is to be considered as the responsible party for the liability purposes ! the holder of the drilling permit, meaning Bp, is the sole responsible party

3.  Liability limits: there is the imposition of some caps on the liability of parties responsible for spills ! damages are capped at $ 75 million (luckily, BP is a deep pocket firm, it ignored the cap and beared the full costs of responding to the spill)

EX-POST REGULATION

CERCLA charges the reimbursement of the clean-up costs to the liable parties. Who should pay for the damages?

Three major firms involved: BP, Halliburton, and Transocean. US report of September 2011: BP can be considered ultimately the responsible of the spill, but the other two companies have to share some of the blame. Class actions after BP publicly took its responsibility: •  individuals and businesses that considered themselves victims of the oil spill •  typical plaintiff represented by the fisherman

TRIAL •  Start: February 25 •  Where: federal court in New Orleans •  Parties involved: a team of private plaintiffs’ attorneys, the federal

government, the British company BP, the rig owner Transocean Ltd., the cement contractor Halliburton, dozens of company executives, rig workers and expert witnesses.

•  US District Judge appointed: Carl Barbier, expert of maritime law •  Main focus: did BP’s actions constitute gross negligence or wilful

misconduct? •  First phase: identify the causes that lead to the blowout of BP’s Macondo

well and allocate faults to the companies involved. •  Second phase: (scheduled to begin in September) quantify how much

crude spilled into the Gulf, explore BP’s tentative to stop the flow of oil.

TRIAL BP: •  guilty of the death of 11 workers and other criminal charges •  paid $ 4 billion in criminal penalties •  reached an agreement for a fine of $ 1.3 billion •  new claims: the damages to natural resources •  reached more than $ 24 billion utilized for the spill-related

expenses (compensation for both individuals and businesses and cleanup costs)

Costs may rise ! Clean Water Act: a polluter has to pay an

amount that goes from a minimum of $1,100 per barrel of spilled oil to a maximum of $ 4,300 if it is found grossly negligent [$ 18 billion for BP]

TRIAL Has BP acted in a glossly negligent way? •  Plaintiffs’ attorneys: to complete the drilling project in the fastest way possible, BP gave up safety •  BP: strongly rejects the idea that it acted in a negligent way; Halliburton and Transocean liable •  Patrick O’Bryan, BP’s vice president of completions and drilling: BP never decided to decrease the level of safety BP has sued Transocean for damages, requesting a refund of $ 20 billion. U.S. government has sued Transocean (on 3 January 2013, declared guilty of the violation of the Clean Water Act; it paid $ 1.4 billion in criminal and civil fines and penalties) and the Halliburton Group (it reported that the contract relieved them of any responsibility).

TRIAL Disputes still open between BP and:

•  the various countries of the Gulf of Mexico affected by the oil spill •  the rescuers who later accused sickness •  the US government.

EPA has banned the British oil group to: •  compete for the award of exploration licenses in Texas; •  participate in the selection of public contracts in the United States until it has clarified what kind of conduct it will take to prevent another oil spill.

07/04/16 17:16BP settles Deepwater Horizon spill for $18.7bn — FT.com

Pagina 1 di 5https://next.ft.com/content/6c356446-20bb-11e5-ab0f-6bb9974f25d0

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BP

BP settles DeepwaterHorizon spill for $18.7bnPayments spread over 18 years underdeal with US authorities

China’s‘teapot’ oilrefineriesposechallenge tomajors8 HOURS AGO

Read latest:Read latest:

by: Christopher Adams in London and Ed Crooks in New York

BP is to push ahead with ambitious newprojects in the Gulf of Mexico, after it agreed a$18.7bn settlement that ends all of its disputeswith the US and five Gulf states over the 2010Deepwater Horizon disaster.

The agreement brought an end to years oflitigation (http://www.ft.com/indepth/bp-trial) over the incident, caused when a well the UKenergy group was drilling in the Gulf blew out,killing 11 men and triggering the worst offshoreoil spill in US history.

In a deal (http://www.ft.com/fastft/354311/bp-settlement-details) with federal authoritiesand the states of Alabama, Florida, Louisiana,Mississippi and Texas, BP agreed to meetdamages claims of up to $18.7bn, thought to bethe largest such settlement with a single entityin US history but billions of dollars less thanhad originally been sought.

JULY 2, 2015 3:37 PM

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Payments, expected to start early next year,will be spread over 18 years and take thecompany’s total Deepwater Horizon-relatedliabilities to $54bn. However, the group couldsave several billion dollars by writing off aportion of the payments against taxes.

Bob Dudley, BP’s chief executive, called thedeal “a realistic outcome which provides clarityand certainty for all parties”.

“For BP this agreement will resolve the largestliabilities remaining from the tragic accident,”he said. For the US and the Gulf, it woulddeliver “a significant income stream over manyyears for further restoration of naturalresources and for losses related to the spill.”

The White House said it was pleased to see theagreement and hoped it would “help repair thedamage done to the local economies of the Gulfand to the wetlands, wildlife and fisheriesimpacted so severely”.



Shares in the company rose 4.5 per cent,reflecting investor relief that the cost of thecivil liabilities will be lower than feared.

A record $5.5bn of the settlement will coverfederal penalties under the Clean Water Act,although that is closer to a provision of $3.5bnset aside by BP than to the figure of around$13bn sought by the US government (http://next.ft.com/content/f5bd8982-9d08-11e4-adf3-00144feabdc0).

Senior executives said the settlement of the“vast majority” of claims related to the disasterwould free BP to accelerate investment in someof the 50 oil and gas projects around the worldit is studying.

The Gulf of Mexico remains a core part of thegroup’s portfolio and could see increasedcapital spending as it adopts a nimbler, moreopportunistic growth strategy. Expansionthrough acquisition could also be an option,though the settlement, by lifting theuncertainty over BP’s liabilities, may yet makeBP a target for ExxonMobil, long rumoured asa possible buyer.

“This will allow us much more flexibility to



plan the future of the company and work in anindustry that is undergoing great change,” MrDudley said.

The settlement means BP will increase byabout $10bn the charge it has set aside fordealing with the spill, from $43.8bn at the endof the first quarter. However, it aims to meetannual payments of just over $1bn from futurecash flow, leaving the dividend intact.

The company’s US exploration and productionsubsidiary would pay the Clean Water Actpenalty as well as $7.1bn to the US and the fivestates for natural resources damages.

Another $4.9bn would be paid to “settleeconomic and other claims” made by the statesand up to $1bn would meet claims by localgovernment entities.

TIMELINE OF A DISASTER: 10 KEY POINTS

Apr2010

An explosion on the DeepwaterHorizon drilling platform above theMacondo oil well in the Gulf ofMexico triggers the largest marineoil spill in US history

Jun2010

The US launches a criminalinvestigation into the spill. Later thatmonth, BP agrees a $20bndownpayment towardscompensation

Oct2010

Bob Dudley replaces Tony Haywardas BP chief executive

Apr BP sues Transocean and Halliburton,



2011 alleging they caused the spill

Oct2011

BP reaches a $4bn agreement withAnadarko Petroleum, which had astake in Macondo, to resolve claimsover the spill

Nov2012

BP agrees a $4.5bn settlement toresolve criminal charges relating tothe spill, although it still faced civilclaims

Mar2013

US trial into BP and its liabilitiesover the spill begins in Louisiana.More than 100,000 claimants areincluded in the litigation

Sept2014

The US court finds BP employeesacted ‘recklessly’, exposing the oilcompany to penalties of up to $18bn

May2015

BP agrees settlements withTransocean and Halliburton toresolve its legal disputes with the oilservices groups over the 2010Deepwater Horizon disaster

July2015

BP reaches a deal with the USgovernment and five states, whichwill see the oil major pay up to$18.7bn over a period of 18 years

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