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February 10, 2012

Settle Down or Settle Up?

BP oil avatarIn the upcoming "trial of the century," nothing is certain except for the fact that BP will be making several more cuts from its bulky checkbook. With claims coming from every zone of the legal landscape, it's hard to say at this point how many billions of dollars will be mandated for reparations or to whom they will be paid. Over $22 billion has already been disbursed for economic losses and cleanup costs, though BP may still be forced to pay at least twice that amount in penalties. The trial is set to begin February 27 -– less than one week after the end of carnival season in New Orleans, yet observers can be sure there will be no wild parading or lavish floats on route to the court house that day.

Debate persists as to whether or not it would be in everyone's best interests to settle the case all together. Obviously, any settlement made on behalf of the oil giant responsible for the 2010 Deepwater Horizon disaster would be unimaginably large, though some argue that there may be more to lose than to gain should a settlement be reached before the trial begins. Thus far, BP has paid or set aside a total $41 billion in damages. Should U.S. District Judge Carl Barbier penalize the company to the full extent of the law it could face up to an additional $34 billion in criminal, punitive, and civil penalties. A more lenient ruling or settlement could slash that number down considerably, ultimately meaning fewer funds for the rehabilitation and preservation of the Gulf. An article from the Times Picayune discusses the dilemma in more detail.

This is not to say that there couldn't be large advantages to settlement. A trial of this magnitude could last years -- potentially increasing the economic and environmental damage that has already laid waste to the Gulf region. There are also those who advocate for heavy precautions in the case of a settlement. In a letter sent to President Obama earlier this week, Sierra Club executive director Michael Brune asked that any deal reached with BP include a fund to pay for comprehensive, long-term restoration of the Gulf's natural resources, including $10 billion set aside to implement early restoration strategies. In addition, any settlement must require each responsible party to pay maximum Clean Water Act penalty fines of $21 billion. Penalty money should be directed at projects that enhance the Gulf's natural resources. Sierra Club attorney Devorah Ancel explains that this outcome is possible. Under a settlement, penalty fines that would otherwise go into the federal Oil Spill Liability Trust Fund may be designated to Gulf recovery projects.  

In either case, no solution will be simple. A trial will place the fate of the Gulf of Mexico in the hands of one judge, though the alternative may mean settling for less. While the costs have been tremendous for every party involved so far, it is still unclear who will be the biggest loser.

 -- Maxwell Gerson, Sierra Club Intern, Louisiana


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