BP: A settlement and many unanswered questions

For those who believed that a trial would be the best way to hold BP accountable for the shortcuts and errors that resulted in the deadly Deepwater Horizon disaster, the news out of New Orleans last night was not good.

BP has reached an agreement and will settle the case brought against it by companies and individuals whose livelihoods were impacted by the Gulf oil spill.

The New York Times reports:

Judge Carl J. Barbier of Federal District Court in New Orleans issued an order late Friday night stating that the two sides “have reached an agreement on the terms of a proposed class settlement which will be submitted to the court,” and announcing that the first phase of the trial, scheduled to begin on Monday, is adjourned indefinitely while the next steps are worked out.

BP issued a statement from the company’s chief executive, Robert Dudley, saying, “The proposed settlement represents significant progress toward resolving issues from the Deepwater Horizon accident and contributing further to economic and environmental restoration efforts along the Gulf Coast.” The company estimated that paying the claims would cost $7.8 billion — but it did not state that the estimate represented an upper limit on what it would pay. It said it had already paid out more than $8 billion to claimants, and had spent some $14 billion in responding to the spill.

The two lawyers who led the plaintiffs’ steering committee, Stephen J. Herman and James P. Roy, said, “This settlement will provide a full measure of compensation to hundreds of thousands — in a transparent and expeditious manner under rigorous judicial oversight.”

This is probably good news for many of the plaintiffs who need help now – had the trial gone to court, it could have dragged on for years. But as the Guardian reported earlier last week, there were plenty of plaintiffs who wanted their day in court:

Chris Jones, whose brother was among the 11 men killed in the explosion on 20 April 2010, said a financial settlement seemed like “the easy way out”.

“I was ready to go to trial and see their feet held close to the fire,” he told the Associated Press.

He’s not the only one. Dean Blanchard, a leading shrimp producer from Grand Isle, Louisiana, before the spill, was adamant: payment would not be enough.

“I want my day in court,” he said. “If they can get off with just paying the money – well, they’ve got plenty of money – they are not really going to learn a lesson.”

He added: “I’d like to make sure this never happens again. Somebody has got to hold BP’s feet to the fire. They have just gotten away with throwing money at problems, but that doesnt get rid of the problems.”

The oil that gushed into the Gulf in the 87 days before the runaway well was capped has destroyed Blanchard’s rich shrimping territory, he said.

Tarballs are still washing up on the beaches of Grand Isle. “The area we worked is a dead zone. It ain’t getting better. Now my competitors who were like a pimple on an elephant’s ass compared to me before the spill are getting more shrimp than me.”

Even some of the claimants who desperately need cash now understand the risks of a settlement, the Guardian story adds:

Al Sunseri, the owner of P&J Oyster Company said his business desperately needs the infusion of cash a settlement would bring. Oyster production is down by 50% in Louisiana since the spill and customers in other parts of the country are shying away from Gulf seafood. Since the spill, there has been a mysterious condition that prevents oyster larvae from reaching maturity.

“We are in limbo right now as a company. We can’t afford to do the things we need to do to remain in our business so I would like to be able to settle,” he said.

“But if there is just a figure that is over and done with I don’t know if it is going to be enough. I want to see them do what they said they would do, which is make everything right. That means the environment needs to made whole again, we want to see the fisheries thrive like they did, that is what I want to see.”

A trial also serves the larger purpose of uncovering what really happened on the Deepwater Horizon rig.

Again from the Guardian:

Aaron Viles, a spokesman for the Gulf Restoration Network, which represents some 45 local organisations, suggested there was no substitute for a full-scale trial. None of the half-dozen investigations had subpoena power to dredge up the full story of what happened on the Deepwater Horizon rig, he said.

Nation of Change published an article on February 27th, Conclusive Evidence that BP misrepresented Gulf Oil Spill Sent to Congress. Among other things, this article alleges that BP illegally drilled several wells in the Macondo well area and that significant oil leakage is still occurring

The SkyTruth blog also has an interesting post on the pros and cons of a trial vs. a settlement. Here’s their conclusion:

Most interesting to us: if settlement talks fail and this case goes to trial, we expect federal prosecutors will attempt to paint BP as a “rogue” operator that took unusual risks, to convince the judge that the spill resulted from gross negligence.  BP, to defend itself, will likely claim that their operations, well design, and decision making were not so unusual, and were consistent with industry-wide practices.  To make that case BP will have to present lots of information about the offshore drilling industry as a whole, including the safety record, accidents and near-misses experienced by other companies that we never hear about.  None of the official investigations of the BP Deepwater Horizon spill looked at the industrywide record, leaving many of us wondering: Just how risky is modern offshore drilling?

A trial may be the only way to answer that question, so we can make better-informed decisions that minimize the likelihood and impact of the next big spill as industry moves steadily forward with deepwater drilling.

There are still other cases pending, including Federal and state governments’ lawsuits against BP, as well as cases filed against Transocean and Halliburton. But there’s a chance that settlements will be reached in those cases, as well.

Again, from the New York Times:

Though all sides have said they are ready to go to trial, the incentives to settle have been enormous.

David M. Uhlmann, who headed the Justice Department’s environmental crimes section from 2000 to 2007, said, “The plaintiffs’ steering committee really needs to reach a settlement with BP” because otherwise it could face years of litigation and might obtain less at trial than it could receive in a settlement.

At the same time, said Mr. Uhlmann, now a professor at the University of Michigan law school, said, “BP really needs to reach a settlement with the government” which could extract many more billions from the company in civil and criminal proceedings. Moreover, he said, the company would like to avoid the embarrassment of having its mistakes paraded in open court.

A few days ago I wrote about the notion of “good” and “bad” oil companies. Are there companies that are really better or worse than others (in terms of how they treat their employees and the environment)? For a number of years — but especially since the Deepwater Horizon disaster, BP has been in “bad” oil company category.

ProPublica investigative journalist, Abrahm Lustgarten, who covered BP and Gulf spill extensively, has written a new book that will be out March 26^th, Run to Failure: BP and the Making of the Deepwater Horizon Disaster.

It sounds like this book provides a detailed history of how and why BP came to be a dangerous corporation.

Bernard Vaughan, reviewed Run to Failure for Reuters and I can’t resist citing a few passages. He writes that the book:

Offers a detailed portrait of a corporate culture that seemed to value controlling costs above human life.

Lustgarten argues that the culture had been spreading like a cancer through the British oil company for years, culminating in the April 2010 tragedy that killed 11, seriously injured 16 and spewed crude oil into the Gulf for 87 days.

Vaughan writes that Lustgarten’s investigation traces BP’s recklessness back to former CEO Lord John Browne:

Browne drove a stunning spree of acquisitions while pushing BP into riskier drilling and ruthlessly cutting costs. In 1990, for example, he cut 1,700 jobs before tasking managers with finding $750 million in budget reductions. Maintenance crews were asked to do more with less, Lustgarten says.

“Even before he had settled on a plan, one thing was clear,” he writes. “The way out of the trap was through abandoning British Petroleum’s historical affinity for safe and predictable operations and through taking some chances.”

Under this new regime, the author claims, pipeline inspectors in Alaska were pressured to doctor their results; key safety infrastructure deteriorated; and managers pushed aside brave employees who spoke out, even blacklisting them.

An internal “fire and explosion” risk assessment in 2000 went so far as to calculate the worth of individual workers: $10 million a head, according to Lustgarten.

“The workers were fewer and the hours longer,” he writes. “Tasks that a pipeline inspector used to complete every three months now happened maybe once a year.”

Unlike Exxon, which Lustgarten says changed its ways after the Valdez debacle, BP failed to right itself even after major accidents, including a 2006 oil spill in Alaska and the explosion of a Texas City, Texas, refinery in 2005 that killed 15. By the time Hayward became CEO in 2007, Lustgarten argues, disregard for safety was entrenched in BP’s culture.

“BP seemed to be displaying an institutional inability to learn from its mistakes,” the author writes.

I’m eager to read this new book, but Lustgarten’s reporting to date for ProPublica and Frontline already makes a strong case that BP is a “bad” oil company. What’s troubling, of course, is that BP is still drilling away and we (the public) have no way to know if this culture of recklessness is changing.

Lustgarten has chimed in on the BP settlement, attempting to lay out the key questions in what is an extremely complex situation. Will BP “suffer” for its actions (will fines actually hurt the company)? Too early to say. What about environmental damage? At this point, the amount of oil spilled remains a matter of debate and although it will take years to measure the real environmental impact of the spill (and the dispersants), it’s clear that there are ongoing problems.

You can read Lustgarten’s article here.

Oh, and by the way, there’s recently been another BP refinery fire — this time in Washington state.

This entry was posted on Saturday, March 3rd, 2012 at 7:14 pm.