Background

BP Exploration and Production Inc (BP) has agreed to pay US$4.5 billion, the largest criminal penalty in US history, by pleading guilty to all charges against it relating to the 2010 explosion of the Deepwater Horizon oil rig, while two of its senior supervisors face lengthy jail sentences.

The explosion of the Deepwater Horizon in April 2010 killed 11 workers and caused 4.9 million barrels of oil to spill into the Gulf of Mexico over 87 days, fouling marshes and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing. Investigations into the explosion have found time saving and cost cutting decisions made by BP and its drilling partners were to blame for the event.

Corporate liability

BP has pleaded guilty to 11 counts of felony manslaughter, violations of the Clean Water Act 1972 (Clean Water Act) and the Migratory Bird Treaty Act 1918 and an obstruction of justice charge in respect of an allegation that it concealed the gravity of the spill from a Congress inquiry.

The US$4.5 billion criminal penalty imposed against BP includes a US$1.256 billion criminal fine, another US$2.4 billion to be paid to the National Fish and Wildlife Foundation, a US$525 million payment to the Securities and Exchange Commission and US$350 million to be paid to the National Academy of Sciences.

However, the penalties do not include the billions of dollars that will be required to defend civil claims currently underway across the US in separate proceedings. For example, a federal judge in New Orleans is currently assessing a proposed US$7.8 billion settlement between BP and more than 100,000 businesses and individuals harmed by the spill. The penalties BP have agreed to also do not prevent the US Government from pursuing civil penalties under relevant legislation.

Individual liability

Additionally, the two highest ranking BP supervisors aboard the Deepwater Horizon during the explosion have also been charged with 11 felony counts of "seaman's" manslaughter, 11 felony counts of involuntary manslaughter and one violation of the Clean Water Act.

The charges against Robert Kaluza and Donald Vidrine arise from their alleged failure to appropriately interpret key safety tests conducted in the lead up to the explosion. The Department of Justice claims that the supervisors "observed clear indications that the Macondo well was not secure and that oil and gas were flowing into the well. Despite this, BP's well site leaders chose not to take obvious and appropriate steps to prevent the blowout".

The two supervisors now face up to 10 years imprisonment on each "seaman's" manslaughter count, up to eight years imprisonment on each involuntary manslaughter count, and up to one year imprisonment for the breach of the Clean Water Act.

In announcing the charges, US Attorney General, Eric Holder stated:

"...I hope that this sends a clear message to those who would engage in this kind of reckless and wanton conduct, that there will be a significant penalty to pay. And that individuals in companies who are engaged in these kinds of activities will themselves be held responsible. This is simply not a corporate plea, individuals... have been charged."

A former BP engineer has also faced charges for obstruction of justice in relation to his role in deleting text messages and other evidence following the spill.

The indictment of the two BP supervisors coincides with the increasing focus by prosecutors in Australia on individual managers and supervisors.

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