A cautionary tale
The BP oil spill and its aftermath demonstrate the necessity of effective regulation
Two and a half years after the Deepwater Horizon disaster that devastated the Gulf of Mexico, British Petroleum, the company responsible for the oil spill, has agreed to pay the largest criminal fine in US history — $4.5 billion — while agreeing to plead guilty on 14 criminal charges, including manslaughter, misconduct and obstruction of a Congressional investigation. The oil spill was the result of an explosion, followed by a fire, and led to one of America's worst environmental disasters. In a statement, the company said that the explosion, which led to the death of 11 people, took place because of a failure to properly interpret pressure tests on the well that might have predicted it.
Some have already questioned whether $4.5 billion is a fair amount for a company whose third-quarter profit this year alone was $5.5 billion, but BP may yet have to pay more. This settlement with the US Department of Justice only limits BP's exposure to further criminal charges and penalties. It does not absolve the oil giant from the civil claims it has yet to face in order to address the damage. A trial in New Orleans, set for February next year, will determine BP's civil liability for its lax safety standards. If the court determines BP to have been grossly negligent, fines could exceed its estimates. The criminal plea can no doubt complicate BP's efforts to contain the cost of civil claims, though the company assured shareholders it will "vigorously fight" any outstanding claims.