British Petroleum fined a record $20.8 billion for oil spill

In a monumental decision, British Petroleum (BP) was fined $20.8 billion for the 2010 oil spill in the Gulf of Mexico; this upgrades the initial deal from the $18.7 that were previously discussed and represents the largest corporate settlement in US history. This money is additional to the reported $28 billion spent on cleanup and compensation.

The oil spill, as seen by NASA's satellites.

The oil spill, as seen by NASA’s satellites. Image via Wikipedia

“The historic civil penalty also sends a clear message of accountability for those who pollute the U.S. environment,” said Adm. Paul Zukunft, the U.S. Coast Guard commandant.

Out of that sum:

  • $8.1 billion for natural resources damage claims, under the Oil Pollution Act. This includes additional money spent on cleaning and monitoring the area
  • $4.9 billion will go to the five Gulf states to compensate for economic damage
  • $1 billion will go to local governments to compensate for economic damage
  • $1.1 B will be managed by the U.S. Coast Guard for response and emergency response efforts
  • $4.4 B will go to the Gulf Coast Restoration Trust Fund in the U.S. Treasury Department

The Justice Department settlement includes $700 million saved for natural problems that might appear in the future – it was recently reported that a tar mat appeared in March in the area, and the oil was matched to the one from BP.

Paying a fine this big, you’d expect a company to be ruined (not to mention the image prejudice BP suffers), but it looks like the London giant will just shake it off. Their revenue was US$ 358.7 billion, while their reported profit is $4 billion. Furthermore, this money won’t all be given up front at once, but will be spread out over multiple years, so they have a pretty good chance of just shrugging it off year after year. But let’s not trivialize this – this is a monumental decision, and we should take our victories where we can get them. Will it hurt BP? Yes, obviously. Is the fine high enough? That’s debatable; does it cover the damage it did? Again, debatable, but probably not. But this decision sets a precedent – one that should have been made years before.

A pelican affected by the oil spill. Image via Wikipedia.

The Deepwater Horizon disaster is widely considered to be the worst oil spill in US history; it killed 11 workers, set the entire rig on fire and started a massive spill which took 87 days to stop. The US Government estimated the total discharge at 4.9 million barrels (210 million US gal; 780,000 cubic meters). The spill area hosts 8,332 species and numerous studies have tried to quantify the environmental damage, which was gargantuan.

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