The Department of Justice has filed a civil lawsuit in New Orleans going after not just BP but eight other companies associated with the Gulf Oil spill. While damages are not specified, it is assumed this will cost in the tens of billions of dollars. It is reported that these penalties would be on top of the $20 billion BP has agreed to pay into a fund to compensate those affected by the spill.
The Clean Water Act specifies various fines based on whether or not negligence is proven. If it is, the fine is $4,300 per barrel spilt, if not, the fine is $1,000 per barrel. While the precise number of barrels remains to be calculated and agreed upon, it is thought to be around 4.9 million barrels. Even a $1,000 fine would add up to $4.9 billion while the stiffer penalty would be $19.6 billion. Whatever the case, BP is preparing for the worst in looking at selling some of its assets in order to raise the necessary funds to cover the eventual penalties it will have to pay.
Amongst the other companies named in the suit, the DoJ is going after Transocean Ltd. which owned and operated the Deepwater Horizon oil rig. Halliburton which was involved in some parts of the construction is not named in this case. In total, those named are: BP Exploration and Production Inc., Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc, Transocean Deepwater Inc, Anadarko Exploration & Production, Anadarko Petroleum Corporation, MOEX Offshore 2007 LLC (a division of Mitsui Oil corporation), Triton Asset Leasing, and BP’s insurer QBE Underwriting/Lloyds.
According to the Wall Street Journal, this suit alleges there were violations of safety procedures and operating guidelines. The defendants failed to take the necessary precautions and failed to use the latest technology to monitor the situation. This latest filing of a suit is merely another in a long list. There are apparently hundreds of class-action suits brought by the fishing, tourism, and seafood industries already making their way through the courts and two states, Alabama and Louisiana have also filed suit against BP and other companies.
Where will this end? The April 20 oil rig explosion killed 11 people and led to the worst offshore oil spill in U.S. history.
The idea of a free market without government interference seems like a good one. However, do we not need some regulations to control how the players play the game? I am thinking of the subprime mortgage crisis where greed completely ignored common sense.
I have heard tell that BP and other oil companies lobbied the U.S. government to not be obliged to install a safety system which would have cost a half a million dollars. Seems like a savings until something like this happens. Pound foolish, penny wise?
Whenever I get into an elevator, I look up on the wall and I see a certificate which says something like "Inspected by the Province of Ontario" and I get a warm fuzzy feeling that when the door closes, I am not going to plummet to the basement. This is a case where regulations or government interference seems to be a good thing. I like it; I feel safe. (see my blog Regulations)
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