BP 2012 Annual Report Download - page 165

Additional disclosures 163
BP Annual Report and Form 20-F 2012
On 20 July 2012, a BP entity received an amended statement of claim for
an action in Alberta, Canada, filed by three plaintiffs seeking to assert
claims under Canadian law against BP on behalf of a class of Canadian
residents who allegedly suffered losses because of their purchase of BP
ordinary shares and ADSs. This case was dismissed on jurisdictional
grounds on 14 November 2012. On 15 November 2012, one of the
plaintiffs re-filed a statement of claim against BP in Ontario, Canada,
seeking to assert the same claims under Canadian law against BP on
behalf of a class of Canadian residents. BP informed the Ontario court that
it intends to contest jurisdiction, and a hearing on this issue has been
scheduled for 23-24 September 2013.
On 5 July 2012, the judge in the federal multi-district litigation proceeding
in Houston (MDL 2185) issued a decision granting the defendants’
motions to dismiss, for lack of personal jurisdiction, the lawsuit against BP
p.l.c. for cancelling its dividend payment in June 2010. On 10 August
2012, the plaintiffs filed an amended complaint, which BP moved to
dismiss on 9 October 2012.
On 30 March 2012, the judge in the federal multi-district litigation
proceeding in Houston (MDL 2185) issued a decision granting the
defendants’ motions to dismiss the ERISA case related to BP share funds
in several employee benefit savings plans. On 11 April 2012, plaintiffs
requested leave to file an amended complaint, which was denied on
27 August 2012. Final judgment dismissing the case was entered on
4 September 2012 and, on 25 September 2012, plaintiffs filed a notice of
appeal to the US Court of Appeals for the Fifth Circuit.
On 1 June 2010, the US Department of Justice (DoJ) announced that it
was conducting an investigation into the Incident encompassing possible
violations of US civil or criminal laws. The DoJ announced on 7 March
2011 that it had created a unified task force of federal agencies, led by the
DoJ Criminal Division, to investigate the Incident. Other US federal
agencies still may commence investigations relating to the Incident. The
SEC and DoJ also investigated potential securities law violations, including
potential securities fraud claims, alleged to have arisen in relation to the
Incident. On 15 November 2012, BP announced that it reached agreement
with the US government, subject to court approval, to resolve all federal
criminal charges and all claims by the SEC against BP arising from the
Deepwater Horizon accident, oil spill and response.
On 29 January 2013, the US District Court for the Eastern District of
Louisiana accepted BP’s pleas regarding the federal criminal charges, and
BP was sentenced in connection with the criminal plea agreement. BP
pleaded guilty to 11 felony counts of Misconduct or Neglect of Ships
Officers relating to the loss of 11 lives; one misdemeanour count under
the Clean Water Act; one misdemeanour count under the Migratory Bird
Treaty Act; and one felony count of obstruction of Congress. The final
judgment and order of the US District Court is provided as Exhibit 99.1 to
this Annual Report and Form 20-F 2012.
Pursuant to that sentence, BP will pay $4 billion, including $1.256 billion in
criminal fines, in instalments over a period of five years. Under the terms
of the criminal plea agreement, a total of $2.394 billion will be paid to the
National Fish & Wildlife Foundation (NFWF) over a period of five years. In
addition, $350 million will be paid to the National Academy of Sciences
(NAS) over a period of five years. The court also ordered, as previously
agreed with the US government, that BP serve a term of five years’
probation. Pursuant to the terms of the plea agreement, the court also
ordered certain equitable relief, including additional actions, enforceable
by the court, to further enhance the safety of drilling operations in the Gulf
of Mexico. These requirements relate to BP’s risk management
processes, such as third-party auditing and verification, BP’s Oil Spill
Response Plan, training, and well control equipment and processes such
as blowout preventers and cementing. BP has also agreed to maintain a
real-time drilling operations monitoring centre in Houston or another
appropriate location. In addition, BP will undertake several initiatives with
academia and regulators to develop new technologies related to
deepwater drilling safety. The resolution also provides for the appointment
of two monitors, both with terms of four years. A process safety monitor
will review, evaluate and provide recommendations for the improvement
of BP’s process safety and risk management procedures including, but
not limited to, BP’s risk review of processes concerning deepwater drilling
in the Gulf of Mexico. An ethics monitor will review and provide
recommendations for the improvement of BP’s code of conduct and its
implementation and enforcement. BP has also agreed to hire an
independent third-party auditor who will review and report to the probation
officer, the DoJ and BP regarding BP’s implementation of key terms of
the proposed settlement, including procedures and systems related to
safety and environmental management, operational oversight, and oil spill
response training and drills. Under the plea agreement, BP has also
agreed to co-operate in ongoing criminal actions and investigations,
including prosecutions of four former employees who have been
separately charged.
In its resolution with the SEC, BP has resolved the SEC’s Deepwater
Horizon-related claims against the company under Sections 10(b) and
13(a) of the Securities Exchange Act of 1934 and the associated rules. BP
has agreed to a civil penalty of $525 million, payable in three instalments
over a period of three years, and has consented to the entry of an
injunction prohibiting it from violating certain US securities laws and
regulations. The SEC’s claims are premised on oil flow rate estimates
contained in three reports provided by BP to the SEC during a one-week
period (on 29 and 30 April 2010 and 4 May 2010), within the first 14 days
after the accident. BP’s consent was incorporated in a final judgment and
court order on 10 December 2012, and BP made its first payment of $175
million on 11 December 2012. BP’s consent and the final judgment and
order of the US District Court are provided as Exhibit 99.2 and Exhibit
99.3, respectively, to this Annual Report and Form 20-F 2012.
BP’s November 2012 agreement with the US government does not
resolve the DoJ’s civil claims, such as claims for civil penalties under the
Clean Water Act or claims for natural resource damages under the Oil
Pollution Act of 1990 (OPA 90). Neither does it resolve the private
securities claims pending in the multi-district litigation proceedings in
Houston (MDL 2185).
On 28 November 2012, the US Environmental Protection Agency (EPA)
notified BP that it had temporarily suspended BP p.l.c., BPXP and a
number of other BP subsidiaries from participating in new federal
contracts. As a result of the temporary suspension, the BP entities listed
in the notice are ineligible to receive any US government contracts either
through the award of a new contract, or the extension of the term of or
renewal of an expiring contract. The suspension does not affect existing
contracts the company has with the US government, including those
relating to current and ongoing drilling and production operations in the
Gulf of Mexico.
The charges to which BPXP pleaded guilty included one misdemeanour
count under the Clean Water Act that, by operation of law following the
court’s acceptance of BPXP’s plea, triggers a statutory debarment, also
referred to as mandatory debarment, of the BPXP facility where the Clean
Water Act violation occurred. On 1 February 2013, the EPA issued a
notice that BPXP was mandatorily debarred at its Houston headquarters.
Mandatory debarment prevents a company from entering into new
contracts or new leases with the US government that would be
performed at the facility where the Clean Water Act violation occurred. A
mandatory debarment does not affect any existing contracts or leases a
company has with the US government and will remain in place until such
time as the debarment is lifted through an agreement with the EPA.
With respect to the entities named in the temporary suspension, the
temporary suspension may be maintained or the EPA may elect to issue a
notice of proposed discretionary debarment to some or all of the named
entities. Like suspension, a discretionary debarment would preclude BP
entities listed in the notice from receiving new federal fuel contracts, as
well as new oil and gas leases, although existing contracts and leases will
continue. Discretionary debarment typically lasts three to five years and
may be imposed for a longer period, unless it is resolved through an
administrative agreement. To date, the EPA has not issued such notice of
proposed discretionary debarment to any of the entities named in the
temporary suspension.
While BP’s discussions with the EPA have been taking place in parallel to
the court proceedings on the criminal plea, the company’s work toward
reaching an administrative agreement with the EPA is a separate process,
and it may take some time to resolve issues relating to such an
agreement. BPXP’s mandatory debarment applies following sentencing
and is not an indication of any change in the status of discussions with the
EPA. The process for resolving both mandatory and discretionary
Additional disclosures