BP today was found grossly negligent in its connection with the 2010 deepwater horizon disaster. It is a most surprising result and will continue to hang over the head of the company, at least until the amount of the fines that BP will have to pay under the Clean Water Act are finally determined, making the stock – again – impossible to own.
But this isn’t a column about BP. It’s a column about corporate responsibility in the oil patch and what companies can expect -- even when they have done their utmost to atone for an admitted negligent mistake. And the message being sent is anything but good.
The Deepwater Horizon blowout in the Gulf of Mexico was the largest oil spill in US history, spewing 2m to 5m barrels of oil into the Gulf, costing 11 lives and disrupting the livelihoods of hundreds of businesses along the Gulf coast. During the 87 days following the disaster as oil and gas spewed, the horror and uncertainty made the event clearly the most seminal in offshore exploration, bringing about a new wave of regulations and fear of deepwater drilling and it’s inherent risks.
There is no denying, from the facts of the case, that BP was negligent and liable in the massive spill – they have admitted that themselves.
But since that spill, the Gulf of Mexico has shown a remarkable ability to heal itself and validated the use of massive dispersants and boom corralling techniques – there were few remaining signs of the spill within months of the…
BP today was found grossly negligent in its connection with the 2010 deepwater horizon disaster. It is a most surprising result and will continue to hang over the head of the company, at least until the amount of the fines that BP will have to pay under the Clean Water Act are finally determined, making the stock – again – impossible to own.
But this isn’t a column about BP. It’s a column about corporate responsibility in the oil patch and what companies can expect -- even when they have done their utmost to atone for an admitted negligent mistake. And the message being sent is anything but good.
The Deepwater Horizon blowout in the Gulf of Mexico was the largest oil spill in US history, spewing 2m to 5m barrels of oil into the Gulf, costing 11 lives and disrupting the livelihoods of hundreds of businesses along the Gulf coast. During the 87 days following the disaster as oil and gas spewed, the horror and uncertainty made the event clearly the most seminal in offshore exploration, bringing about a new wave of regulations and fear of deepwater drilling and it’s inherent risks.
There is no denying, from the facts of the case, that BP was negligent and liable in the massive spill – they have admitted that themselves.
But since that spill, the Gulf of Mexico has shown a remarkable ability to heal itself and validated the use of massive dispersants and boom corralling techniques – there were few remaining signs of the spill within months of the arresting of the runaway well and today you virtually could not tell it had ever happened.
From BP’s point of view, they undertook a massive campaign of cleanup and personal responsibility for the blowout, initially depositing $20B into a compensation fund administered by Ken Feinberg under the ‘suggestion’ of the Obama administration. They initially assured the public that they would compensate for every legitimate claim outside of that fund and undertook a huge public safety upgrade for all of their operations and an advertising campaign to try and restore credibility in the Gulf and throughout their US operations.
They’ve set aside $43 billion dollars – a gargantuan total – to compensate harmed parties in the spill, but it’s clear that $43b will not be enough now.
Every local government and business from New Orleans to Pensacola has sued BP for damages, with many of these entities refusing the mediation of the “Feinberg fund”. The rampant parasitic glomming of these lawsuits has been well documented by Bloomberg particularly, but forced CEO Robert Dudley to publicly renege on the company’s compensation promise.
Now with this ruling of gross negligence from Federal judge Barbier, these parasites will now expect and get even more undeserved ‘compensation’ and has opened BP to receive the maximum penalties under the Clean Water Act from the Justice department. At dispute now will be the total number of barrels spilled, with BP maintaining a more conservative 2m barrels and with the Feds projecting 5m barrels or more, with a maximum fine of $3400 per barrel. That’s another possibly $17B in fines that are likely to be levied against BP, if the bad luck for the company continues to hold up – which looks likely.
One overwhelming question I have is the result of BP’s efforts to ‘make right’ the mistakes of Deepwater Horizon on corporate behavior. We tend to rail against the lack of corporate ethics, in banking and the energy sectors particularly, but find in this case a compelling reason for companies to deny their mistakes and shirk their responsibilities in the future.
What should BP think, or what should any company think about a Justice system that looks to mete out the maximum fines, even after liability is admitted and responsibility is fully taken? To me it implies that moral behavior at the expense of fiduciary responsibility is likely to be unrewarded – that companies should admit no failings, fight every ruling, appeal every negative result and deny any liabilities.
Is that the corporate policy message we want to be sending?
But that, to me, is precisely the message that Judge Barbier has sent to the corporate world today. It’s unlikely to go unheeded.
