Everything You Ever Wanted to Know About BP’s $4.5 Billion Fine

The oil titan continues to profit even as it pays out a record penalty.

In protest of 2010's Deepwater Horizon oil spill in the Gulf of Mexico, Greenpeace activists in Vienna deface a BP banner. (Photo: Lisi Niesner/Reuters)

Nov 19, 2012· 4 MIN READ
A six-time grantee of the National Geographic Expeditions Council, Jon writes about all things ocean.

Last week BP reached a settlement with the Justice Department and agreed to pay $4.5 billion in fines and penalties. Even though it's the largest single criminal fine and biggest total criminal resolution in U.S. history, the company is still in business and will continue to make money.

The FDA still recommends that residents only eat two three-ounce servings of seafood from the Gulf each week, which is illogical if you’ve ever been to a fish-house in southern Louisiana.

Though the April 2010 explosion has to date cost the company more than $12 billion in fines and cleanup, BP actually made a reasonable profit in 2011 of $5.5 billion (due to rising oil prices).

"People here in Louisiana don't feel very good about last week's settlement," said Mary Lee Orr, ED, Louisiana Environmental Action Network, in an exclusive interview with TakePart. "The small fisherman has not and does not feel like he's going to be compensated."

This begs the question: Who, or what, exactly gets the $4.5 billion?

— The bulk ($2.4) billion will be distributed by the National Fish and Wildlife Foundation to be paid out over five years to help restore the environment of the Gulf of Mexico; most of that will be spent in Louisiana.

— $350 million is earmarked for the National Academy of Sciences for oil spill prevention, education, research and training.

— More than $1 billion goes to the Coast Guard’s Oil Spill Liability Trust Fund to pay for future cleanups.

— And $525 million goes to the Securities and Exchange Commission for misleading its investors regarding the size of the spill.

Now that you've got those basic facts, let's deep dive into the fine to see if it will help those folks living in the hardest hit areas.

MORE: Two Years Later, B.P. Oil Spill Still Killing Gulf Marine Life

1) How much more will BP have to pay out? The Justice Department is expected to pursue fines due under the Clean Water Act of up to $4,300 per barrel of oil spilled (more than 200 million gallons), which could cost it between $5 and $21 billion. A federal judge in New Orleans is weighing a separate, proposed $7.8 billion settlement between BP and more than 100,000 businesses and individuals who say they were harmed by the spill. There will also be federal and state fines to cover "Natural Resources Damages," which could take a decade or longer to resolve. Suffice it to say, BP is going to be paying for years to come. "We're looking forward to the trial in which we intend to prove that BP was grossly negligent in causing the oil spill," U.S. Atty. Gen. Eric Holder said at a news conference last Thursday.

2) What has been done to prevent a similar accident in the future? A six-month moratorium on new drilling was put in place on the heels of the accident, but today deep-water drilling in the Gulf is growing at a record rate. In 2012 the Obama administration has already issued the most deep-water oil drilling permits for the Gulf of Mexico since 2007.

As for improved safety on the thousands of rigs working in the Gulf? On the day the settlement was announced, an explosion and fire rocked a rig 20 miles southeast of Grand Isle, Louisiana, killing two and severely burning four workers. Investigators are still looking into what caused the explosion; since the rig was not producing oil, it appears spillage was minimal. After the Deepwater Horizon accident, the Obama Administration did adopt new rules to increase safety in the Gulf and increase penalties for spills—but only the next accident will tell how successful they are.

3) Will the settlement help the fishermen who depend on the Gulf for their livelihood? The Seafood Compensation Program, using money from a first BP payment of nearly $3 billion, is satisfying some claims among fishermen impacted by the spill. At the same time, a variety of class-action suits have been organized—by shrimpers, oystermen, crab fishermen—which have to yet to have their day in court.

BP lawyers contend that the shellfish industry has rebounded to almost its pre-spill level. Yet shrimp boat dock landing data collected by the Louisiana Department of Wildlife and Fisheries indicates that catches for fall 2011 and spring 2012 were off by more than 50 percent. While part of the settlement will go toward restoring the Gulf Coast, no amount of money can eliminate remnants of the spill from the ocean floor, its fish, or the sea itself.

4) How does it help human health impacted by the spill? The simple truth is that it's too early to say with certainty what the health impacts of the spill on humans will be, so it's equally hard to say if there'll be enough money to help. Real health impacts of the Exxon Valdez spill and the cleanup after the collapse of the World Trade Center didn't evidence themselves for many years afterwards. It's highly likely that hydrocarbons from the BP spill are still accumulating in Gulf residents and anyone who eats fish from the surrounding waters. The FDA still recommends that residents only eat two three-ounce servings of seafood from the Gulf each week, which is illogical if you've ever been to a fish-house in southern Louisiana. As part of the settlement, the National Academy of Sciences has been asked to establish a new $350 million, 30-year program on human health and environmental protection in the Gulf of Mexico.

5) Is BP getting away with murder? Though the company plead guilty to 14 counts and three of its employees were charged (two with manslaughter), Oceana CEO Andy Sharpless wonders if the company is still "getting away with murder."

His estimate is that the company owes Americans "up to $20 billion in violations of the Clean Water Act and up to $30 billion in damages to natural resources. Add to that compensation for the widespread disruptions in the fishing and tourism industries and, by our estimate, the company still owes as much as $90 billion to American taxpayers."

6) What do the locals think? "People here in Louisiana don't feel very good about the settlement," said Mary Lee Orr, ED, Louisiana Environmental Action Network, in an exclusive interview with TakePart. "The small fisherman has not and does not feel like he's going to be compensated. Those made sick by the impacts of the spill are the ones most removed from the system. No insurance, no jobs—because they're sick—no money to even buy gas to drive to the doctor. And from a public relations standpoint, now that people feel like BP has taken care of everything, there's no reason to keep supporting nonprofits like ours because BP makes it sound like everything's paid for. On a personal level, there are no oysters or crabs for Thanksgiving, as traditional as turkeys for us, because the fishermen aren't catching them, since their numbers are greatly reduced. I feel like we should be compensated for our loss of culture, just like everything else."

Was the record fine levied upon BP too much, too little, or something else? Tell us in the COMMENTs below.

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