BP said Tuesday it is ready to defend itself in court over civil liability charges brought against it in the US over the Macondo oil spill after attempts to settle out of court failed.
BP late last year agreed with the US Department of Justice a $4 billion settlement over criminal charges against the company, which was approved by a US judge at the end of January.
However, BP said it has been unable to settle on the civil liability charges and said it would defend itself in court against allegations of gross negligence.
"We have always been open to settlements on reasonable terms, failing which we have always been prepared to defend our case at trial," Rupert Bondy, group general counsel of BP, said in a statement.
The stakes are high for BP, which could face civil fines under the US Clean Water Act of as much as $21.1 billion if a court rules that the discharge from the Macondo well was the result of "gross negligence or willful misconduct."
"Faced with demands that are excessive and not based on reality or the merits of the case, we are going to trial," Bondy said. "We have confidence in our case and in the legal team representing the company and defending our interests."
BP is preparing for the federal civil trial beginning next Monday in the US District Court for the Eastern District of Louisiana. The proceeding is the first of at least two phases the court has set for the trial.
The first phase will be focused on the causes of the Deepwater Horizon accident, who should be held responsible, and to what degree, BP said. The court will ultimately determine the legal and factual issues at the heart of the case, including whether BP or any other party was grossly negligent, BP said.
"Gross negligence is a very high bar that BP believes cannot be met in this case," Bondy said. "This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent."
The April 20, 2010 blowout at BP's Macondo well in the Gulf of Mexico destroyed Transocean's Deepwater Horizon drilling rig, killing 11 workers and setting off the largest marine oil spill in US history -- an estimated 4.9 million barrels of oil.
'Overstated' spill volumes
The second phase, set for September this year, will deal with what BP calls the "inflated government flow rate estimates" from the Macondo spill. BP believes the estimate of 4.9 million barrels to be at least 20% too high.
"Although there is inherent uncertainty in this quantification, the company believes that the government's public estimate of 4.9 million barrels of oil released is at least 20% overstated," BP said.
"These issues are extremely complicated as a technical matter, and there is still further analysis to do. But it is clear, based on our analysis so far, that the government's public estimate is simply wrong."
BP said that whatever the final number of barrels released from the reservoir is proven to be, BP does not believe that the 810,000 barrels of oil that the company successfully captured from the Macondo reservoir without it entering the Gulf of Mexico waters should be considered in the court's future determination of Clean Water Act penalties.
The company in its statement said that under the Clean Water Act, civil penalties are assessed only on oil that has actually entered the environment and potentially caused harm.
"On the basis that the 4.9 million barrels figure includes an over-estimate of at least 20%, and given that a further 810,000 barrels need to be deducted from the volume that flowed from the reservoir, BP believes that a figure of 3.1 million barrels should be the uppermost limit of the number of barrels spilled that should be used in calculating a Clean Water Act penalty," it said.
The amount of oil spilled is part of the calculation made to determine CWA penalties. The law provides for penalties of either $37,500 per day of discharge or $1,100/b. If it is found that the discharge was due to "gross negligence or willful misconduct," the penalty is raised to $4,300/b.
Using the government's estimate of discharge of 4.9 million barrels, that puts BP's liability at between $5.4 billion to $21.1 billion. Using BP's lower estimate, the company's liability could be between $3.4 billion and $13.3 billion.
"In determining the penalty, we believe the court should consider, among other things, the fact that BP immediately stepped up and acknowledged our role in the accident. We waived the statutory cap on liability, and to date, we've spent more than $23 billion in response, clean-up, and payments on claims," it said.
BP stressed that it had been willing to settle. "We settled with our partners in the well and with some of our contractors. In addition, we settled all of the federal government's criminal and securities claims against the company," Bondy said.
BP will be represented at trial by Robert Brock of Covington & Burling LLP; Hariklia Karis, Andrew Langan and Matthew Regan of Kirkland & Ellis LLP; and Don Haycraft of Liskow & Lewis.
