BP 2010 Annual Report Download - page 133

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Additionalinformationforshareholders
Additional information for shareholders
On7July2010,theUSChemicalSafetyandHazardInvestigationBoard
(CSB)informedBPofitsintenttoconductaninvestigationoftheIncident.
Theinvestigationisfocusedonthe20April2010explosionsandre,and
nottheresultingoilspillorresponseefforts.TheCSBisexpectedtoissue
withintwoyearsseveralinvestigationreportsthatwillseektoidentifythe
allegedrootcause(s)oftheIncident,andrecommendimprovementstoBP
andindustrypracticesandtoregulatoryprogrammestopreventrecurrence
andmitigatepotentialconsequences.Also,attherequestofthe
DepartmentoftheInterior,theNationalAcademyofEngineering/National
ResearchCouncilestablishedaCommittee(Committee)toexaminethe
performanceofthetechnologiesandpracticesinvolvedintheprobable
causesoftheexplosion,includingtheperformanceoftheblowout
preventerandrelatedtechnologyfeatures,andtoidentifyandrecommend
availabletechnology,industrybestpractices,bestavailablestandards,and
othermeasuresintheUSandaroundtheworldrelatedtooilandgas
deepwaterexploratorydrillingandwellcompletiontoavoidfuture
occurrenceofsuchevents.On17November2010theCommitteeissued
itsinterimreportsettingforththecommittee’spreliminaryndingsand
observationsonvariousactionsanddecisionsincludingwelldesign,
cementingoperations,wellmonitoring,andwellcontrolactions.The
interimreportalsoconsidersmanagement,oversight,andregulationof
offshoreoperations.WeexpectthattheCommitteewillissueitsnal
reportthatpresentstheCommittee’snalanalysis,includingndingsand/
orrecommendations,by1June2011(apre-publicationversionofreport),
withfurtherpeerreviewandanalpublishedversiontofollowby30
December2011.
Asecond,unrelatedNationalAcademies’Committeewillbelooking
atthemethodologiesavailableforassessingspillimpactsonecosystemsin
theGulfofMexico,andasummaryoftheknowneffectsofthespill,the
impactsinthecontextofstressesfromotherhumanactivitiesintheGulf,
andidenticationofresearchandmonitoringneedstomorefully
understandtheeffectsofthespillandgaugeprogresstowardsrecovery
andrestoration.On14June2010,theUSCoastGuardinitiatedanIncident
SpecicPreparednessReview(ISPR)toexaminetheimplementationand
effectivenessoftheresponseandrecoveryoperationsrelatingtothespill.
WeunderstandthattheISPRprocesshasbeencompletedandaReport
(Report)hasbeengenerated;howevertheReporthasnotyetbeenmade
publiclyavailable.WeexpectthattheReportwillbemadepubliclyavailable
sometimeintherstquarterof2011.Additionally,BPrepresentativeshave
appearedbeforemultiplecommitteesoftheUSCongressthathavebeen
conductinginquiriesintotheIncident.BPhasprovideddocumentsand
writteninformationinresponsetorequestsbythesecommitteesandwill
continuetodoso.SeeRiskfactors–Complianceandcontrolriskson
page29.
On1June2010,theUSDepartmentofJustice(DoJ)announced
thatitisconductinganinvestigationintotheIncidentencompassing
possibleviolationsofUScivilorcriminallaws.TheUnitedStatesledacivil
complaintagainstBPE&Pandotherson15December2010.Thecomplaint
seeksadeclarationofliabilityunderOPA90andcivilpenaltiesunderthe
CleanWaterAct.Paragraph92ofthecomplaintsetsforthapurported
‘reservationofrights’onbehalfoftheUnitedStatestoamendthe
complaintorleadditionalcomplaintsseekingvariousremediesunder
variouslawsandregulations,includingbutnotlimitedtoeightspecically
mentionedfederalstatutes.Paragraph92ofthecomplaintlikewise
containsasimilar‘reservationofrights’regardingtheconductof
‘administrativeproceedings’under‘theOuterContinentalShelfLandsAct,
43U.S.C.§§1301et seq.,andtheFederalOilandGasRoyalty
ManagementAct,30U.S.C.§§1701et seq.’
Citizensgroupshavealsoledeitherlawsuitsornoticesofintentto
lelawsuitsseekingcivilpenaltiesandinjunctivereliefundertheClean
WaterActandotherenvironmentalstatutes.OtherUSfederalagencies
maycommenceinvestigationsrelatingtotheIncident.TheSECandDoJ
areinvestigatingsecuritiesmattersarisinginrelationtotheIncident.
TheAttorneyGeneralfortheStateofAlabamahasledalawsuit
seekingdamagesforallegedeconomicandenvironmentalharms,including
naturalresourcedamages,asaresultoftheIncident.Itispossiblethatthe
StateAttorneysGeneralofLouisiana,Mississippi,Florida,Texasorother
statesand/orlocalgovernments,suchascoastalmunicipalitiesalsomay
initiateinvestigationsandbringcivilorcriminalactionsseekingdamages,
penaltiesandnesforviolatingstateorlocalstatutes.TheLouisiana
DepartmentofEnvironmentalQualityhasissuedanadministrativeorder
seekinginjunctivereliefandenvironmentalcivilpenaltiesunderstatelaw,
andseverallocalgovernmentsinLouisianahaveledsuitsunderstate
wildlifestatutesseekingpenaltiesfordamagetowildlifeasaresultofthe
spill.On10December2010,theMississippiDepartmentofEnvironmental
QualityissuedaComplaintandNoticeofViolationallegingviolationsof
severalStateenvironmentalstatutes.
On15September2010,threeMexicanstatesborderingtheGulfof
Mexico(Veracruz,QuintanaRoo,andTamaulipas)ledlawsuitsinfederal
courtinTexasagainstseveralBPentities.Theselawsuitsallegethattheoil
spillharmedtheirtourism,shing,andcommercialshippingindustries
(resultingin,amongotherthings,diminishedtaxrevenue),damagednatural
resourcesandtheenvironment,andcausedthestatestoincurexpensesin
preparingaresponsetotheoilspill.
BP’spotentialliabilitiesresultingfrompendingandfutureclaims,
lawsuitsandenforcementactionsrelatingtotheIncident,togetherwiththe
potentialcostofimplementingremediessoughtinthevariousproceedings,
cannotbefullyestimatedatthistimebuttheyhavehadandareexpected
tohaveamaterialadverseimpactonthegroup’sbusiness,competitive
position,cashows,prospects,liquidity,shareholderreturnsand/or
implementationofitsstrategicagenda,particularlyintheUS.Furthermore,
BPhastakenapre-taxchargeinitsincomestatementof$40.9billionin
totalduring2010,andthesepotentialliabilitiesmaycontinuetohavea
materialadverseeffectonthegroup’sresultsandnancialcondition.
Other legal proceedings
From25October2007to23October2010,BPAmericaInc.(BPAmerica)
wassubjecttooversightbyanindependentmonitor,whohadauthorityto
investigateandreportallegedviolationsoftheUSCommodityExchange
ActorUSCommodityFuturesTradingCommission(CFTC)regulationsand
torecommendcorrectiveaction.Theappointmentoftheindependent
monitorwasaconditionofthedeferredprosecutionagreement(DPA)
enteredintowiththeDoJon25October2007relatingtoallegationsthat
BPAmericamanipulatedthepriceofFebruary2004TETphysicalpropane
andattemptedtomanipulatethepriceofTETpropaneinApril2003andthe
companionconsentorderwiththeCFTC,enteredthesameday,resolving
allcriminalandcivilenforcementmatterspendingatthattimeconcerning
propanetradingbyBPProductsNorthAmericaInc.(BPProducts).TheDPA
requiredBPAmerica’sandcertainofitsafliates’continuedco-operation
withtheUSgovernment’sinvestigationandprosecutionofthetradesin
question,aswellasothertradingmattersthatmayarise.TheDPAhada
termofthreeyearsbutcouldbeextendedbytwoadditionalone-year
periods,andcontemplateddismissalofallchargesattheendoftheterm
followingtheDoJ’sdeterminationthatBPAmericahascompliedwiththe
termsoftheDPA.TheinitialthreeyeartermhasexpiredandtheDoJ’s
motiontodismisstheactionunderlyingtheDPAwasgrantedon
31January2011.InvestigationsintoBP’stradingactivitiescontinuetobe
conductedfromtimetotime.TheUSFederalEnergyRegulatory
Commission(FERC)andtheUSCommodityFuturesTradingCommission
(CFTC)arecurrentlyinvestigatingseveralBPentitiesregardingtradingin
thenext-daynaturalgasmarketatHoustonShipChannelduringOctober
andNovember2008.TheFERCOfceofEnforcementstaffnotiedBPon
12November2010oftheirpreliminaryconclusionsrelatingtoalleged
marketmanipulationinviolationof18C.F.R.Sec.1c.1.TheFERCstaffwill
determinewhethertopursuetheinvestigation,toclosetheinvestigation,
ortoseekauthoritytopursueresolutionbysettlement.On30November
2010,CFTCEnforcementstaffalsoprovidedBPwithanoticeofintentto
recommendchargesbasedonthesameconductallegingthatBPengaged
inattemptedmarketmanipulationinviolationofSection6(c),6(d),and9(a)
(2)oftheCommodityExchangeAct.BPsubmittedresponsestoboth
noticeson23December2010providingadetailedresponsethatitdidnot
engageinanyinappropriateorunlawfulactivity.Privatecomplaints,
includingclassactions,werealsoledagainstBPProductsandafliates
allegingpropanepricemanipulation.Thecomplaintscontainedallegations
similartothoseintheCFTCactionaswellasofviolationsoffederaland
stateantitrustandunfaircompetitionlawsandstateconsumerprotection
statutesandunjustenrichment.Thecomplaintssoughtactualandpunitive
damagesandinjunctiverelief.Settlementinbothgroupsoftheclass
BPAnnualReportandForm20-F2010 131