Donatella Porrini BP OIL SPILL. 6 April, 2016 LIUC COURSE: CORPORATE CITIZENSHIP FOR GLOBAL FIRM

Transcription

1 Donatella Porrini BP OIL SPILL 6 April, 2016 LIUC COURSE: CORPORATE CITIZENSHIP FOR GLOBAL FIRM 1

2 THE ACTORS Deepwater Horizon Builder: Hyundai Owner: Transocean Leasee: British Petroleum

3 LOCATION GULF%OF%MEXICO%%% % % % 80Km%from%Louisiana% % One%of%the%biggest%drill:%% %around%9000%barrels%of%oil% %per%day%

4 THE FACTS 20%April,%2010%G%EXPLOSION) 11 Casualties 17 injured 22 April, deposited on the seabed OIL SPILL

5 CLEAN-UP ATTEMPTS Over 30,000 people Skimmer ships Floating booms Dispersant to break up the oil Controlle d burns

6 STEM ATTEMPTS Remote%controlled%machines% Containment% Dome %(a%capping%device)% Top%Kill %approach%(pumping%heavy%fluids%in% the%blowout%preventer)% 15%July% %temporary%cap% 3 rd %August% % StaXc%Kill %operaxon%(mud%and% cement%injected)% 19%September,%2010% %well%officially% dead %%

7 OIL SPILLED 106%days%long%leak% More%than%4.9%million%barrels% 11,300%miles% %distance%covered% by milk jugs lined up side by side - farther than New York to Buenos Aires and back 102: school gymnasiums filled floor-to-ceiling

8 DAMAGE EVALUATION

9 DAMAGE EVALUATION

10 DAMAGE EVALUATION Ecology%% Fisheries) Tourism%% Health) Economy%%

11 AN UPDATE OF THE SITUATION Administration: fast to reorganize the criticized Minerals Management Service; two agencies established, BOEMRE and BSEE asked for more funds to help the authorities to carry out their job Offshore drilling industry: introduced tools to contain a high-pressure blowout in deep water Not yet the creation of an independent safety institute that will focus on safety US Congress: It has introduced just the RESTORE Act (80 percent of the fines used for environmental and economic restoration projects) should increase the financial responsibility and the liability cap requirements for offshore facilities; raise the Oil Spill Liability Trust Fun s limitation

12 EX-ANTE IMPROVEMENTS In order to increase the effectiveness of exante regulation in the oil industry, we propose the introduction of some new regulations: BUILDING PROCEDURES DRILLING OPERATIONS SAFETY REVISIONS

13 EX-POST REGULATION EX#POST#REGULATION#SCHEME 1. FIRM,#INJURER,#POLLUTER:#BP# 2. CAUSALITY:# environmental# pollu0on,# oil# spread# in# waters#and#on#lands 3. EVENT:#oil#spill,#an#accident 4. DAMAGE#EVALUATION 5. DAMAGE#EVALUATION#EFFECTS#AND#TIMING 6. VICTIMS:#individuals,#society,#animals,#environment#

14 EX-POST REGULATION The Oil Pollution Act of 1990 (OPA 90) should be considered. 3 different principles at the heart of the law : 1. Strict liability: parties responsible for oil spills are considered strictly liable for damages caused even if they have not acted in a negligent way! BP 2. Channels liability: companies should exactly specify who is to be considered as the responsible party for the liability purposes! the holder of the drilling permit, meaning Bp, is the sole responsible party 3. Liability limits: there is the imposition of some caps on the liability of parties responsible for spills! damages are capped at $ 75 million (luckily, BP is a deep pocket firm, it ignored the cap and beared the full costs of responding to the spill)

15 EX-POST REGULATION CERCLA charges the reimbursement of the clean-up costs to the liable parties. Who should pay for the damages? Three major firms involved: BP, Halliburton, and Transocean. US report of September 2011: BP can be considered ultimately the responsible of the spill, but the other two companies have to share some of the blame. Class actions after BP publicly took its responsibility: individuals and businesses that considered themselves victims of the oil spill typical plaintiff represented by the fisherman

16 TRIAL Start: February 25 Where: federal court in New Orleans Parties involved: a team of private plaintiffs attorneys, the federal government, the British company BP, the rig owner Transocean Ltd., the cement contractor Halliburton, dozens of company executives, rig workers and expert witnesses. US District Judge appointed: Carl Barbier, expert of maritime law Main focus: did BP s actions constitute gross negligence or wilful misconduct? First phase: identify the causes that lead to the blowout of BP s Macondo well and allocate faults to the companies involved. Second phase: (scheduled to begin in September) quantify how much crude spilled into the Gulf, explore BP s tentative to stop the flow of oil.

17 TRIAL BP: guilty of the death of 11 workers and other criminal charges paid $ 4 billion in criminal penalties reached an agreement for a fine of $ 1.3 billion new claims: the damages to natural resources reached more than $ 24 billion utilized for the spill-related expenses (compensation for both individuals and businesses and cleanup costs) Costs may rise! Clean Water Act: a polluter has to pay an amount that goes from a minimum of $1,100 per barrel of spilled oil to a maximum of $ 4,300 if it is found grossly negligent [$ 18 billion for BP]

18 TRIAL Has BP acted in a glossly negligent way? Plaintiffs attorneys: to complete the drilling project in the fastest way possible, BP gave up safety BP: strongly rejects the idea that it acted in a negligent way; Halliburton and Transocean liable Patrick O Bryan, BP s vice president of completions and drilling: BP never decided to decrease the level of safety BP has sued Transocean for damages, requesting a refund of $ 20 billion. U.S. government has sued Transocean (on 3 January 2013, declared guilty of the violation of the Clean Water Act; it paid $ 1.4 billion in criminal and civil fines and penalties) and the Halliburton Group (it reported that the contract relieved them of any responsibility).

19 TRIAL Disputes still open between BP and: the various countries of the Gulf of Mexico affected by the oil spill the rescuers who later accused sickness the US government. EPA has banned the British oil group to: compete for the award of exploration licenses in Texas; participate in the selection of public contracts in the United States until it has clarified what kind of conduct it will take to prevent another oil spill.

20 BP settles Deepwater Horizon spill for $18.7bn FT.com 07/04/16 17:16 By continuing to use this site you consent to the use of cookies. Find out more BP BP settles Deepwater Horizon spill for $18.7bn Payments spread over 18 years under deal with US authorities Read latest: China s teapot oil refineries pose challenge to majors 8 HOURS AGO JULY 2, :37 PM by: Christopher Adams in London and Ed Crooks in New York BP is to push ahead with ambitious new projects in the Gulf of Mexico, after it agreed a $18.7bn settlement that ends all of its disputes with the US and five Gulf states over the 2010 Deepwater Horizon disaster. The agreement brought an end to years of litigation ( ) over the incident, caused when a well the UK energy group was drilling in the Gulf blew out, killing 11 men and triggering the worst offshore oil spill in US history. In a deal ( -settlement-details) with federal authorities and the states of Alabama, Florida, Louisiana, Mississippi and Texas, BP agreed to meet damages claims of up to $18.7bn, thought to be the largest such settlement with a single entity in US history but billions of dollars less than had originally been sought. More on this topic Suggestions below based on BP BP settlement puts a value on clarity BP: settling down BP accused of playing down impact of Gulf of Mexico oil spill BP ends bid to oust oil spill claims boss BP settles with Transocean and Halliburton over gulf spill Pagina 1 di 5

21 BP settles Deepwater Horizon spill for $18.7bn FT.com 07/04/16 17:16 Payments, expected to start early next year, will be spread over 18 years and take the company s total Deepwater Horizon-related liabilities to $54bn. However, the group could save several billion dollars by writing off a portion of the payments against taxes. Bob Dudley, BP s chief executive, called the deal a realistic outcome which provides clarity and certainty for all parties. For BP this agreement will resolve the largest liabilities remaining from the tragic accident, he said. For the US and the Gulf, it would deliver a significant income stream over many years for further restoration of natural resources and for losses related to the spill. The White House said it was pleased to see the agreement and hoped it would help repair the damage done to the local economies of the Gulf and to the wetlands, wildlife and fisheries impacted so severely. Pagina 2 di 5

22 BP settles Deepwater Horizon spill for $18.7bn FT.com 07/04/16 17:16 Shares in the company rose 4.5 per cent, reflecting investor relief that the cost of the civil liabilities will be lower than feared. A record $5.5bn of the settlement will cover federal penalties under the Clean Water Act, although that is closer to a provision of $3.5bn set aside by BP than to the figure of around $13bn sought by the US government ( xt.ft.com/content/f5bd8982-9d08-11e4-adf feabdc0). Senior executives said the settlement of the vast majority of claims related to the disaster would free BP to accelerate investment in some of the 50 oil and gas projects around the world it is studying. The Gulf of Mexico remains a core part of the group s portfolio and could see increased capital spending as it adopts a nimbler, more opportunistic growth strategy. Expansion through acquisition could also be an option, though the settlement, by lifting the uncertainty over BP s liabilities, may yet make BP a target for ExxonMobil, long rumoured as a possible buyer. This will allow us much more flexibility to Pagina 3 di 5

23 BP settles Deepwater Horizon spill for $18.7bn FT.com 07/04/16 17:16 plan the future of the company and work in an industry that is undergoing great change, Mr Dudley said. The settlement means BP will increase by about $10bn the charge it has set aside for dealing with the spill, from $43.8bn at the end of the first quarter. However, it aims to meet annual payments of just over $1bn from future cash flow, leaving the dividend intact. The company s US exploration and production subsidiary would pay the Clean Water Act penalty as well as $7.1bn to the US and the five states for natural resources damages. Another $4.9bn would be paid to settle economic and other claims made by the states and up to $1bn would meet claims by local government entities. TIMELINE OF A DISASTER: 10 KEY POINTS Apr 2010 Jun 2010 Oct 2010 Apr An explosion on the Deepwater Horizon drilling platform above the Macondo oil well in the Gulf of Mexico triggers the largest marine oil spill in US history The US launches a criminal investigation into the spill. Later that month, BP agrees a $20bn downpayment towards compensation Bob Dudley replaces Tony Hayward as BP chief executive BP sues Transocean and Halliburton, Pagina 4 di 5

24 BP settles Deepwater Horizon spill for $18.7bn FT.com 07/04/16 17: alleging they caused the spill Oct 2011 Nov 2012 Mar 2013 Sept 2014 May 2015 July 2015 BP reaches a $4bn agreement with Anadarko Petroleum, which had a stake in Macondo, to resolve claims over the spill BP agrees a $4.5bn settlement to resolve criminal charges relating to the spill, although it still faced civil claims US trial into BP and its liabilities over the spill begins in Louisiana. More than 100,000 claimants are included in the litigation The US court finds BP employees acted recklessly, exposing the oil company to penalties of up to $18bn BP agrees settlements with Transocean and Halliburton to resolve its legal disputes with the oil services groups over the 2010 Deepwater Horizon disaster BP reaches a deal with the US government and five states, which will see the oil major pay up to $18.7bn over a period of 18 years Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. The Financial Times Ltd. Pagina 5 di 5