BP 2013 Annual Report Download - page 147

2. Significant event – Gulf of Mexico oil spill – continued
See Legal proceedings on page 257 for further details on all litigation and claims activity.
Provision movements
The total amount recognized as an increase in provisions during the year was $2,239 million, including $1,921 million for items covered by the trust
fund and $318 million for other items (2012 $6,868 million, including $1,985 million for items covered by the trust fund and $4,883 million for other
items). In addition, $379 million (2012 $794 million) was derecognized relating to items that will be covered by the trust fund but which can no longer
be reliably estimated. After deducting amounts utilized during the year totalling $3,777 million, including payments from the trust fund of $3,051 million
and payments made directly by BP of $726 million (2012 $5,864 million, including payments from the trust fund of $4,624 million and payments made
directly by BP of $1,240 million), and after reclassifications and adjustments for discounting, the remaining provision as at 31 December 2013 was
$9,346 million (2012 $15,200 million).
The total amounts that will ultimately be paid by BP in relation to all obligations relating to the incident are subject to significant uncertainty and the
ultimate exposure and cost to BP will be dependent on many factors. Furthermore, significant uncertainty exists in relation to the amount of claims that
will become payable by BP, the amount of fines that will ultimately be levied on BP (including any determination of BP’s culpability based on any
findings of negligence, gross negligence or wilful misconduct), the outcome of litigation and arbitration proceedings, and any costs arising from any
longer-term environmental consequences of the oil spill, which will also impact upon the ultimate cost for BP. The amount and timing of any amounts
payable could also be impacted by any further settlements which may or may not occur. Although the provision recognized is the current best reliable
estimate of expenditures required to settle certain present obligations at the end of the reporting period, there are future expenditures for which itis
not possible to measure the obligation reliably.
Contingent liabilities
BP has provided for its best estimate of amounts expected to be paid from the trust fund that can be measured reliably. This includes certain amounts
expected to be paid pursuant to the Oil Pollution Act of 1990 (OPA 90). It is not possible, at this time, to measure reliably other obligations arising from
the incident that are under the terms of the trust fund, namely any obligation in relation to natural resource damages claims or associated legal costs
(except for the estimated costs of the assessment phase and costs relating to early restoration agreements under the $1-billion framework agreement
referred to above), claims asserted in civil litigation including any further litigation through excluded parties from the PSC settlement includingasset
out in Legal proceedings, the cost of business economic loss claims under the PSC settlement not yet received, processed and paid by the DHCSSP,
any further obligation that may arise from state and local government submissions under OPA 90 and any obligation in relation to other potential private
or governmental litigation, nor is it practicable to estimate their magnitude or possible timing of payment. Therefore, no amounts have been provided
for these obligations as at 31 December 2013.
Natural resource damages resulting from the oil spill are currently being assessed. BP and the federal and state trustees are collecting extensive data in
order to assess the extent of damage to wildlife, shoreline, near shore and deepwater habitats, and recreational uses, among other things. The study
data will inform an assessment of injury to the Gulf Coast natural resources and the development of a restoration plan to address the identified injuries.
Detailed analysis and interpretation continue on the data that have been collected. Any early restoration projects undertaken pursuant to the $1-billion
framework agreement could mitigate the total damages resulting from the incident. Accordingly, until the size, location and duration of the impact is
assessed, it is not possible to estimate reliably either the amounts or timing of the remaining natural resource damages claims, therefore no such
amounts have been provided as at 31 December 2013.
As described under Provisions above, BP has identified multiple business economic loss claim determinations under the PSC settlement that appeared
to result from an interpretation of the EPD Settlement Agreement by the claims administrator that BP believes was incorrect. Uncertainty as to the
interpretation of the EPD Settlement Agreement will continue until the effects of the implementation of new policies and procedures are known, the
issue of causation and the requirements for class membership under the EPD Settlement Agreement are resolved on appeal and the courts have ruled
on the appeals in relation to the final order and judgment approving the EPD Settlement. Therefore the potential cost of business economic loss claims
not yet received, processed and paid is not provided for and is disclosed as a contingent liability. A significant number of business economic loss
claims have been received but have not yet been processed and paid, and further claims are likely to be received.
As described above in Provisions, a provision has been made for State and Local claims that can be measured reliably. In January 2013, the States of
Alabama, Mississippi and Florida submitted or asserted claims to BP under OPA 90 for alleged losses including economic losses and property damage
as a result of the Gulf of Mexico oil spill. BP is evaluating these claims. The States of Louisiana and Texas have also asserted similar claims. The
amounts claimed, certain of which include punitive damages or other multipliers, are very substantial. However BP considers these claims
unsubstantiated and the methodologies used to calculate these claims to be seriously flawed, not supported by OPA 90, not supported by
documentation, and to substantially overstate the claims. Similar claims have also been submitted by various local government entities and a foreign
government under OPA 90, and more claims are expected to be submitted. The amounts alleged in the submissions for these State and Local Claims
total approximately $35 billion. BP will defend vigorously against these claims if adjudicated at trial.
Proceedings relating to securities class actions (MDL 2185) pending in federal court in Texas, including a purported class action on behalf of purchasers
of American Depository Shares under US federal securities law, are continuing. A jury trial is scheduled to begin in October 2014. No reliable estimate
can be made of the amounts that may be payable in relation to these proceedings, if any, so no provision has been recognized at 31 December 2013.
In addition to the State and Local claims and securities class actions described above, BP is named as a defendant in approximately 2,950 other civil
lawsuits brought by individuals, corporations and government entities in US federal and state courts, as well as certain foreign jurisdictions, resulting
from the Deepwater Horizon accident, the Gulf of Mexico oil spill, and the spill response efforts. Further actions are likely to be brought. Among other
claims, these lawsuits assert claims for personal injury or wrongful death in connection with the accident and the spill response, commercial and
economic injury, damage to real and personal property, breach of contract and violations of statutes, including, but not limited, to alleged violations of
US securities and environmental statutes. Until further fact and expert disclosures occur, court rulings clarify the issues in dispute, liability and damage
trial activity nears or progresses, or other actions such as further possible settlements occur, it is not possible given these uncertainties to arrive at a
range of outcomes or a reliable estimate of the liabilities that may accrue to BP in connection with or as a result of these lawsuits. Therefore no
amounts have been provided for these items as at 31 December 2013. See Legal proceedings on page 257 for further information.
For those items not covered by the trust fund it is not possible to measure reliably any obligation in relation to other litigation or potential fines and
penalties except, subject to certain assumptions detailed above, for those relating to the Clean Water Act. There are a number of federal and state
environmental and other provisions of law, other than the Clean Water Act, under which one or more governmental agencies could seek civil fines and
penalties from BP. For example, a complaint filed by the United States sought to reserve the ability to seek penalties and other relief under a number of
other laws. Given the unsubstantiated nature of certain claims that may be asserted, it is not possible at this time to determine whether and to what
extent any such claims would be successful or what penalties or fines would be assessed. Therefore no amounts have been provided for these items.
Financial statements
BP Annual Report and Form 20-F 2013 143