Just after mainstream financial news outlets reported that BP p.l.c. is close to a settlement for the 2010 Deepwater Horizon explosion that killed 11 workers and caused the worst oil spill in U.S. history, there is more bad news for BP that could cause its fine to soar tens of billions of dollars.
Sweet Deal for BP Likely Derailed
It was all going so well for BP and it denies being negligent, an important consideration when determining the scale of damages. Under the Clean Water Act alone, the civil fines reportedly range from $5.4 to $21 billion, so BP wants to be at the lower end of the range. Moreover, there are clean-up costs and various lawsuits, so one wants to set a precedent as close to the minimum as possible. If fines could be levied through the Oil Pollution Act, BP could take a tax deduction on the cost. This was shaping up to be a sweet deal for BP despite the fact -- or perhaps because of the fact -- this is an election year.
"Gross Negligence and Willful Misconduct"
But let's not forget the Department of Justice's findings. The picture for BP is horrendous, even if financial reporters have developed amnesia. The DOJ gave examples of "gross negligence and willful misconduct," and a "culture of corporate recklessness." Regarding the interpretation of a pressure test on the well, the DOJ asserted:
That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence.
Pattern of Negligence
If the pattern of negligence outlined by the DOJ weren't enough, Norwegian authorities are "investigating" the circumstances around an oil and gas leak off the coast of Norway. At issue is the safety of BP's production platforms. It raises the issue of whether BP is appropriately maintaining facilities, mothballing facilities that have outlived their useful lives, and training and retraining workers in safety protocols.
New Oil Sheen in the Gulf of Mexico for BP and Transocean Limited
CNN reported a four-mile-long oil sheen near the spot where the Deepwater Horizon rig exploded in April 2010. That's over the Macondo well.
Earlier I wrote: "It's too early to say BP is responsible, but it's appropriate to ask the question, especially since U.S. Senators have petitioned President Obama in a bipartisan letter to make sure the proposed legal settlement with BP is fair and in accordance with the spirit of the RESTORE Act, designed to help the coastal states damaged by the spill."
Well today we know. Coast Guard samples show the new oil sheen matches samples taken from the Deepwater Horizon spill. That puts BP and Transocean on the top of the list for potential costs associated with this new problem.
The gravity of the situation is not yet known. The entire area should be reinvestigated to check for leaks and potential weak spots.
Taken as a whole, there's no reason for the U.S. to give ground to BP when it comes to assessing fines and damages. The difference between the low end of the ranges discussed and the high end of the ranges is in the tens of billions of dollars.
Disclosure: I own puts on BP and a minor position in legacy shares.
Wenonah Hauter: A Real Hero in the Chesapeake Bay
also cause by a faulty mud (concrete) cap which blew out, I believe that all offshore
drilling should come under the jaundiced eye of a responsible overseeing committee.
The first blow out was in the Caspian Sea, and was covered up by BP in collusion
with the Azerbaijan government This was uncovered by WikiLeaks. This should make
us more cautious when dealing with greedy and unscrupulous corporations.
A brit called knox made a fortune from a mine here & rolled it on drilling in now iran
BP knew or should have known from its own history of its technology that a burst would probably ensue. This is an act of gross negligence at least and an offensive by a then British transnational corporation against the United States. Now consider the human costs, the destruction to our food supply, the US coast line, the ocean and Gulf, the habitat of millions of humans, we have not even considered the damage done to Mexico and the implications of what you stated as a defense against appropriation.
This is very significant. This changes the negligence charges against BP to something more, perhaps negligent homicide. B.P. had prior warning of their faulty processes and control well before they ever dug that well in the Gulf.
http://www.youtube.com/watch?feature=player_embedded&v=_sgCG7H6U1E
http://www.gregpalast.com/bps-secret-deepwater-blowout/
http://www.gregpalast.com/bp-cover-uppart-2-bribery-george-bush-and-wikileaks/
Ordinarily, I would ask you divest yourself of stock for ruthlessly negligent companies, but perhaps if people who hold BP stock would just hold it until the price falls when we the people get our payback, then and only if stockholders lose will we ever obtain any sense of justice for the damages due to the catastrophic oil well blowout. The health of our citizens and our environment have suffered enough. All we are left with is the slim hope that BP will be forced to pay fines and penalties that seriously reflect the magnitude of the mal behavior. Anything less will be a triumph for BP and a loss of integrity for our nation and we the little people.
Thus, in light of the fact that her article has a negative slant that could help to cause the price of BP stock to go lower, her disclosure that she is likely to profit if BP's stock price goes lower is potentially significant, and she should be commended for making that disclosure.
The disclosure is best practice in transparancy for financial writers.
I am not surprised because her work is of the highest integrity.
That's often forgotten these days when stocks are seen as merely a respectable form of gambling, but it is still the case