BP Calls Witnesses in Fight to Reduce Oil Spill Penalty

It was oil giant BP’s turn on Monday to call witnesses as it made its case for a civil penalty lower than the $13.7 billion the U.S. government is seeking for the 2010 Gulf of Mexico oil spill.

The second week of a three-week trial began in New Orleans. Last week, government experts testified about environmental, economic and social damage arising from the spill. BP attorneys disputed much of that testimony, and have argued the recovery of the environment and the Gulf economy has been strong.

Also at issue in the trial is whether a heavy penalty would put too much financial strain on BP Exploration and Production – also known as BPXP. That’s the affiliate in the BP corporate group deemed responsible for the spill.

The government has argued in briefs that other BP companies’ resources should be considered when the judge weighs the effect of a penalty on BPXP’s economic health.

Among the first witnesses BP attorneys are expected to call are BP executive Laura Folse and Frank Paskewich, a retired Coast Guard captain familiar with oil spill cleanup work. They are expected to counter government witness testimony downplaying the effectiveness of BP’s oil recovery efforts.

U.S. District Judge Carl Barbier is presiding over the case. He isn’t expected to rule until April at the earliest. Based on two earlier trial phases, he has already ruled that BP acted with “gross negligence” in the explosion on the Deepwater Horizon rig at BP’s Macondo well. BP is appealing that finding.

Barbier also ruled recently that 3.19 million barrels of oil was discharged as a result of the disaster. The government wants a maximum penalty of $4,300 per barrel, or about $13.7 billion. Under the federal RESTORE Act, passed after the spill, 80 percent of the Clean Water Act penalties would be set aside for environmental and economic restoration projects along the Gulf Coast. The remaining dollars will go into a federal trust fund to cover costs tied to any future oil spills.

BP estimates it has already piled up $42 billion in costs related to the spill, including cleanup costs, criminal penalties and settlements with businesses affected by the spill.

In addition to pushing for the hefty BP penalty, the government has suggested a $1 billion-plus penalty for Anadarko, a minority partner in the Macondo well. Anadarko is fighting that penalty, noting it was a non-operational partner in the well.