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Liability at Issue in Oil Flow Rate in Gulf

Source: NY Times

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Posted on 21 Jul 2010

When BP suggested over the weekend that it might leave the Gulf of Mexico well capped until it completed the relief wells, Representative Edward J. Markey, Democrat of Massachusetts, suggested that the company might have an ulterior motive -- to limit its own spiraling legal liability.

Mr. Markey said reopening the well would allow the first accurate measure of the flow and accused the company of trying to forestall a reckoning of the spill.

Until now, the actual flow rate of oil gushing into the gulf has been based on estimates. With the well tightly capped, any efforts to collect the oil to ships on the surface would provide a better reading of the oil flow. BP’s ultimate liability for damages from the spill will be based in part on that flow.

“BP has a stake in lowering its liability,” Mr. Markey said in an interview, since fines are assessed by the barrel. The company, he said, has consistently underestimated the flow out of its runaway well.

“Initially, they said it was only 1,000 barrels per day that was going into the gulf, then 5,000 barrels a day,” he said. “It’s obvious in retrospect that they were either lying or grossly incompetent in making those representations to the U.S. government and to the American people.”

The fines could be staggering, even for a company as wealthy as BP. The Clean Water Act sets a civil fine of $1,100 for every barrel of oil released in a spill, in addition to responsibility for paying for environmental cleanup and economic loss.

If the government determines that the spill was the result of gross negligence, the fine jumps to $4,300 a barrel.

On Wednesday, Mr. Markey demanded a “full flow-rate test” on the well; official estimates have put the flow rate at as much as 60,000 barrels a day. Considering such vast amounts, a disagreement over the number of barrels spilled each day could amount to enormous sums: a 10,000-barrel-a-day difference over the three months of the spill could mean $3.7 billion in fines.

Mark Salt, a BP spokesman, said the goal in retaining the cap was not to minimize the liability or give a low estimate of flow rate, but to shut off the flow of oil effectively and safely.

“The number is whatever the number will be,” Mr. Salt said. “But that doesn’t change what we want to do — which is to stop the leak.”

The decision whether to keep the well capped or resume drawing off the oil, Mr. Salt said, lies with the federal government’s incident commander, Thad W. Allen, a retired Coast Guard admiral. “We’re completely aligned with Admiral Allen,” he added.

In many cases, disputed factual issues are left to others — like a jury or a special master appointed by a judge — to determine after hearing from experts for each side.

But experts in environmental litigation do not expect the government’s case to actually go to trial. BP will almost surely settle its civil and criminal cases, said David M. Uhlmann, a professor of environmental law at the University of Michigan. “BP has nothing to be gained and a lot to lose by reliving this tragedy in an American courtroom a year or two from now,” he said.

Mr. Uhlmann, a former chief of the environmental crimes section at the Department of Justice, said he doubted that BP was trying to manipulate the well to low-ball flow estimates, since that could lead to felony charges of obstruction of justice.

“Congressman Markey’s concern is understandable, and his skepticism is understandable,” the professor said, “but it’s not in BP’s interest to proceed as he’s been suggesting.”

Mr. Uhlmann predicted that the government would seek, and get, the largest civil and criminal penalties in American history — sums in the billions of dollars “that will be adequate to punish BP and deter such behavior into the future,” he said.

He added, however, that he doubted that the government would seek the highest possible penalty for every ounce of oil spilled. “That’s just not the way life works — that’s not the way negotiations work,” he said. “The maximum penalties here, if they imposed them, would probably wipe out the company.”

Federal prosecutorial guidelines require weighing factors like the interests of a company’s shareholders, the financial security of the company’s employees, and the need for the company to survive in a way that allows it to meet its obligations to pay for the spill.

Mr. Markey said that however liability was assessed, the oil needed to be measured — accurately, and soon.

“BP’s defense lawyers will flourish in an atmosphere of ambiguity,” he said. “The federal taxpayer will flourish, legally, if the number is established with precision right now.”


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