BP Plc (BP) has alleged the U.S. government of concealing proofs that may reveal that the 2010 Deepwater Horizon oil spill in the Gulf of Mexico was not as massive as claimed by the federal officers.
Per the documents revealed by the government, the oil spill had catastrophic effects killing eleven people and pouring 4.9 million barrels from the mile-deep Macondo oil well, and was considered the worst offshore U.S. incident in history.
However, BP claims that an August 2010 estimation of 4.9 million barrels of oil spilled from the well is too high. This can be proved if the documents which have not been exposed by the government are disclosed. Around 10,000 documents that the government tried to hide with respect to the oil spill have been recognized by BP.
The breach of Clean Water Act along with other laws led the U.S. government to take legal action against the main defendants in the trial––BP, Transocean Ltd. (RIG) and Halliburton Company (HAL). Several other companies are also involved in the trial.
As the penalty amount is dependent on the size of the spill, BP’s fine may go up to tens of billions of dollar, as the Gulf states are seeking compensation for their damages, while BP and its drilling partners are also suing each other. Based on current estimations, BP may have to shell out about $17.6 billion.
According to the Clean Water Act, the accused is charged a maximum fine of $1,100 per barrel of oil spilled or $4,300 if there was gross negligence. Therefore, a reduction in the size of the oil spill would lower the amount of civil fine BP would be entitled to pay.
In March, BP had reached a settlement of $7.8 billion with Plaintiffs’ Steering Committee that covered a significant extent of legitimate economic loss and medical claims arising from the Deepwater Horizon accident and oil spill. The settlement included an amount of $2.3 billion set aside to especially help cover claims related to the Gulf seafood industry. The agreement did not settle the claims BP faces against the U.S. government and drilling partners.
BP holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain a Neutral recommendation on the stock.
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