By on July 7, 2015

 

Last week’s news of BP’s $18.7 billion settlement with federal and state governments brought to close the second act of one of the worst environmental tragedies of all time. There’s no promise that the third act won’t drag out for decades and ultimately end in heartbreak either.

BP’s structured settlement means the oil producer will pay roughly $1 billion each year over the next two decades to state and local governments impacted by the 3.9 million barrels of oil dumped into the Gulf of Mexico from the Deepwater Horizon oil rig. Of course, there’s no amount of money that could assuage the grief from families of the 11 workers killed in the spill.

But the settlement doesn’t address the hundreds of individual or class action lawsuits, or many of the claims made against BP by local business owners and people since the 2010 spill. Some of those civil cases are still in court, some on appeal, and many are years away from a meaningful conclusion.

The penalty needs context:

  • BP collected more than $2 billion in profits in the first quarter of this year, despite dropping gas prices.
  • The penalty levied against BP is the biggest environmental penalty of all time, and the largest case the government has ever settled with a single entity of all time.
  • Stocks of BP soared on news that its massive penalty was actually manageable, and in some cases half of what analysts predicted.
  • BP significantly restructured after the spill, and is fundamentally different and smaller than the company was in 2010.

In many cases the message is supremely mixed: the biggest penalty for one of the biggest companies. BP will live, the governments get their money and the Gulf Coast inhabitants directly affected may see their environment partially restored, but not their livelihoods.

However, buried deep within the settlement is the figurative pound of flesh that leaves the settlement short in my opinion. According to the New York Times, only $232 million — or roughly 1 percent of the overall settlement — is dedicated to environmental impact that hasn’t been discovered yet. It’s woefully short for an oil spill that is unequalled in size and scope. The money for future impact is also the most tangible “penalty” in the settlement as well.

Like anyone on a diet will tell you, a pound of human fat is an alarming sight and a relatively successful deterrent for overeating for some people — including me. Seeing a hulking lump of the effects of human excess isn’t the most appetizing sight either. That logic should apply to corporate excess.

By many accounts, BP was a company growing too much, too fast in 2010. Their negligence in the early days of the Deepwater Horizon spill no doubt contributed to the size and scope of the environmental disaster. Since then, BP has replaced executives, trimmed their size and production, and adjusted expectations for a company that once tried to rival Exxon. All of those actions are commendable, but doesn’t absolve them of wrongdoing in 2010.

Gulf states have been irreparably damaged, people and businesses have suffered — or died — and in many ways, the Gulf’s natural ecosystem will never be the same. BP’s $18.7 billion settlement with the state and federal governments goes a long way in repairing many of those states’ environments and infrastructures. But it also leaves open the possibility that many private businesses and people will never see a settlement for their claims, nor does it adequately provide for enough money to uncover any other harms of the spill.

The settlement is massive in its size and scope, but lacks the pound of flesh necessary to ensure another excessive oil producer is more careful with their appetite in the future.

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44 Comments on “Editorial: BP’s Settlement and a Pound of Flesh...”


  • avatar
    John R

    Who can be surprised?

    As long as big business are in cahoots with senators and representatives, both Democratic and Republican, House of Cards will continue to be a documentary.

    • 0 avatar
      FreedMike

      I’m just curious – what do you think should have been done? The only things I can think of would be things like banning the company from doing business (which would be counterproductive if the goal is to get them to pay for what they did), or maybe putting their execs in jail.

      As satisfying as it would be to watch the CEO of this company do the perp walk, I don’t see how we can do that the way our laws are set up. Or am I incorrect?

      • 0 avatar
        clivesl

        Well the fact that there is no ultimate personal responsibility is kind of the point yes?

        When the only punishment society can inflict is financial, then you are going to have a class that is effectively untouchable.

        If BP had an owner whose life can be destroyed if that spill happens, maybe, just maybe they are a little more careful. I don’t know, but it seems worth a shot.

      • 0 avatar
        John R

        Something more substantive. In fact a perp walk might a good place to start.

        If BP’s managers could be found criminally negligent it might send a clearer message than some financial penalty that can be amortized.

        • 0 avatar
          FreedMike

          Then the question becomes how to make a CEO, for example, responsible for the actions of his or her underlings, whether there was direct knowledge of the wrongdoing or not. I don’t see how you do that in our justice system.

  • avatar
    WhiskeyRiver

    Never underestimate the Federal government’s ability or zeal to extract that pound of flesh should that unknown future eco crisis arrive. Relieving corporations of their money is something they’re very very good at.

    • 0 avatar
      30-mile fetch

      A foreign-controlled gigantic corporation craps all over our shoreline with their negligence, “relieving” local businesses and economies of their money, receives a penalty that makes their stock go up because it’s smaller than expected, and you’re worried about our own government implementing future punitive measures against them if it is discovered that they created even more harm than we think they did?

      A very odd sense of sympathy to say the least.

    • 0 avatar
      FreedMike

      In this case, relieving a corporation of its money is entirely appropriate. They KILLED people. Are you trolling?

      • 0 avatar
        clivesl

        At the end of the day, everyone wants to feel like somebody has your back.

        For reasons that defy understanding, Whiskey has placed more trust in the people that are trying to sell him stuff than the people that he elects to have his back.

        People are fun

        • 0 avatar
          WhiskeyRiver

          I didn’t pick a side. I just made a point. Anyone in corporate America who has to deal with the Feds can attest to what I said.

          It wasn’t a post crafted or designed to sympathize with BP. Far from it.

          Do I think they should have been made to do more? Yes.

          Believe me, they’ll get their pound of flesh if necessary. And, nothing prevents anyone harmed from filing civil suit to recover their damages.

          It’s a shame people have to immediately draw a conclusion as to intent over a simple statement like this.

          • 0 avatar
            30-mile fetch

            “It’s a shame people have to immediately draw a conclusion as to intent over a simple statement like this.”

            It’s the internet, it’s what we do. Apologies for jumping the gun, I read it more as a defense of BP/critique of the federal penalty. Usually simple neutral statements aren’t made about touchy subjects like this.

  • avatar
    carguy

    There is also very little set aside for the health effects resulting from the inhalation all those volatile hydrocarbons.

    After seeing how poorly 9/11 responders are being treated I would urge everybody to think twice before getting involved in any sort of environmental cleanup or emergency operation.

  • avatar
    Daniel J

    Nice Op-ed.

  • avatar
    cwallace

    This is The Truth About Cars, not The Truth About Some Guy’s Opinion On Environmental Litigation.

    Boo.

    • 0 avatar
      Shinoda is my middle name

      The Truth About Cars is, if it weren’t for our addiction to individual personal transportation, there might not have been an oil spill. As owner’s and drivers of cars, especially owners and drivers of the big V-8, SUV’s, pony cars, and huge pickups we don’t need (I’ve got no qualms with farmers or people using them for WORK), we are all at least a little bit culpable for the spill in the gulf. Think about that, next time you fill up. Even if it is not at a BP station.

      • 0 avatar
        honda_lawn_art

        Where are you from? Negligence caused that spill, not demand. Some might say oil companies create demand, think about that next time you fill up.

      • 0 avatar
        cwallace

        I do think about it, every day. I thought about it when I stood on the deck of the Q4000 and watched the failed BOP lifted to the surface after the well was capped. I thought about it when I met a widow of one of the eleven Deepwater Horizon crewmen lost, and all I could tell her was that we will be more vigilant. That her loss would lead to change. And it has.

        These pages are for Jack to thrill us with rental car derring-do from the driver and the passenger seat, for Sajeev and Steve to pass on wisdom, and for Mark to say “damn” a lot. This is not the place for someone with no demonstrated expertise on a subject to armchair quarterback political issues.

        • 0 avatar
          FreedMike

          Sorry, cwallace, I disagree. Our love of cars is driven by oil, and sometimes it’s worth thinking about the consequences of that.

        • 0 avatar

          Yeah, I am with FreedMike on this. Driving is a luxury with a number of costs involved beyond the normal depreciation and maintenance of your own vehicle. This is one of the true costs of being a mobile society.

          Unfortunately, it’s also one of the costs (environmental damage from fuel exploration) that gets ignored when people make maps of places where it’s dirty to own an electric vehicle.

          • 0 avatar
            usernamealreadyregistered

            “Driving is a luxury”

            This statement is demonstrably false for most gainfully employed people in most areas of the United States.

          • 0 avatar
            Drzhivago138

            I would say that’s more indicative of our overall prosperity than anything else. So yes, still a luxury. #FirstWorldProblems

  • avatar
    Doug Z

    What the heck does this have to do with cars? This website has gone down the tubes.

  • avatar
    Doug Z

    Go down to the Gulf coast. I don’t see the damage. This writer has an agenda that is not based on fact.

    I didn’t know TTAC was into this stuff. What is next? PETA and vegan posts?

    • 0 avatar

      The head of PETA, Ingrid Newkirk, loves formula 1 racing, reads Car and Driver and Autoweek–and who knows, maybe even reads TTAC.

      Regarding the damage, plenty of fishermen lost their livelihoods, among much else.

    • 0 avatar
      30-mile fetch

      “I don’t see the damage”

      Quick, someone tell all those ivory tower scientists that their “measurements” and “analysis” and “education” is for naught, because we’ve got ourselves the real deal here. A reductive observer so astute that his gaze penetrates soil, water, and animal cellular function to tell us what difficult biological investigations by professionals never can: I don’t see anything wrong.

      I have a family member with emphysema. He looks just fine to me, so I’ll tell him not to worry about what the “doctors” say.

    • 0 avatar
      Charliej

      Doug, if you don’t see the damage. It is because you have not been to the gulf coast at the right time. Down on the Alabama coast, whenever there is a storm in the gulf and the wind is out of the South, oil and tar balls wash up on the beaches. By the thousands. Then there is the fishing industry. Many of the fish caught off the Alabama coast have open sores on their bodies. No sane person is going to eat these fish. Also, large numbers of porpoises have been dying in the gulf, since 2010. It turns out the oil droplets in the water give the porpoises pneumonia. The problem is that the damage will take many decades to heal. It will heal, in time. I will never see it. I am too old to live long enough to see the gulf return to health. It makes me sad, as I always enjoyed sailing in the gulf, but no more.

  • avatar
    FreedMike

    There is some carping about how this company got off easy, but I don’t think so. We’re talking almost $19 billion here – that’s enough to make any company think twice about cutting corners and endangering the public the way BP did.

    Nothing can set things completely right, but under our system this is the justice we can get. The alternative, I suppose, would be to simply ban BP from doing business here altogether, which would be counterproductive to the economy (and would prevent them from paying for their malfeasance). And then we have the Chinese system, in which the mobile execution van would show up at BP headquarters. I don’t think we necessarily would want to choose either of those options (though I would like to see some criminal consequences for the INDIVIDUALS involved).

  • avatar
    SCE to AUX

    This wasn’t the opinion I expected to see, and not one I had shared to date. But it has given me new perspective, something I always appreciate here at TTAC.

    This article is entirely relevant to the business of TTAC.

  • avatar
    APaGttH

    If you listen closely, you can hear the screams of a million Farago’s and a million Niedermeyer’s that this story is on TTAC.

  • avatar
    jpolicke

    Now let’s see what all those government bodies spend the money on. Will it go towards remediation of the environment and compensation for people affected, or will it get pi$$ed away on God knows what like they did with the tobacco settlement windfall? I know which outcome I’m betting on.

  • avatar
    usernamealreadyregistered

    “Stocks of BP soared on news that its massive penalty was actually manageable, and in some cases half of what analysts predicted.”

    The difference between BP plc’s closing prices on July 1 and July 2 is what, 5%? And the fact that analysts guessed wrong on the settlement amount doesn’t mean, and should not be used to suggest, that the settlement number is bad. It means that the analysts guessed wrong and the people who knew kept their mouths shut.

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