BP 2014 Annual Report Download - page 40

Gulf of Mexico oil spill
Economic and environmental restoration progress
continues, while BP makes its case in court.
BP restoration projects in Louisiana include creating a fish hatchery and
rebuilding and restoring beach, dune and marsh habitat on a number of
coastal islands.
Environmental and economic restoration
We have made significant progress in completing the response to the
accident and supporting environmental and economic recovery efforts in
affected areas. The US Coast Guard ended patrols and operations on the
final shoreline miles in Louisiana in April 2014. The Coast Guard has now
transitioned all shoreline areas to their National Response Center process.
If residual oil from the Deepwater Horizon incident is later identified and
requires removal, BP will take action at the direction of the Coast Guard.
BP is responsible for the reasonable and necessary costs of assessing
injury to natural resources resulting from the oil spill and of restoration as
defined under the Oil Pollution Act of 1990 (OPA 90). In 2014 activity was
focused on natural resource damage assessment and further progress was
made on early restoration work.
Natural resource damage assessment and early restoration projects
Scientists from BP, government agencies, academia and other
organizations are studying a range of species and habitats to understand
how wildlife populations and the environment may have been affected
by the accident and oil spill. Since May 2010, more than 240 initial and
amended work plans have been developed by state and federal trustees
and BP to study resources and habitat. The study data will inform an
assessment of injury to natural resources in the Gulf of Mexico and the
development of a restoration plan. The plan will address the identified
injuries including the recreational use of these resources, as well as an
estimated cost to implement it. By the end of 2014, BP had spent
approximately $1.3 billion to support the assessment process. See
gulfsciencedata.bp.com for environmental data collected through the
natural resource damage assessment process.
While the injury assessment is still ongoing, restoration work has begun.
In April 2011 BP committed to provide up to $1 billion in early restoration
funding to expedite recovery of natural resources injured as a result of the
Deepwater Horizon incident. BP and the trustees, as at December 2014,
had reached agreement on a total of 54 early restoration projects that
are expected to cost approximately $700 million, of which $629 million had
been funded by the end of 2014. BP is providing project funding in
exchange for restoration credits to be applied against the trustees’ final
assessment of BP’s natural resource damages funding obligations.
Gulf of Mexico Research Initiative
In May 2010 BP committed $500 million over 10 years to fund
independent scientific research through the Gulf of Mexico Research
Initiative. The goal of the research initiative is to improve society’s ability
to understand, respond to and mitigate the potential impacts of oil spills
on marine and coastal ecosystems. BP has contributed $215 million to
the programme as at 31 December 2014.
Economic recovery
BP continued to support economic recovery efforts in local communities
through a variety of actions and programmes in 2014. By 31 December
2014, BP had spent $13.4 billion on economic recovery, including claims,
advances, settlements and other payments, such as state tourism grants
and funding for state-led seafood testing and marketing.
See bp.com/gulfofmexico for more information on environmental and
economic restoration activities.
Multi-district litigation proceedings in New Orleans
The multi-district litigation trial relating to liability, limitation, exoneration
and fault allocation (part of MDL 2179) began in the federal district court in
New Orleans in February 2013.
Phase 1 – causes of the accident and allocation of fault
The district court issued its ruling on the first phase of the trial in
September 2014. It found that BP Exploration & Production Inc. (BPXP –
the BP group company that conducts exploration and production
operations in the Gulf of Mexico), BP America Production Company and
various other parties are each liable under general maritime law for the
blowout, explosion and oil spill from the Macondo well. With respect to the
United States’ claim against BPXP under the Clean Water Act, the district
court found that the discharge of oil was the result of BPXP’s gross
negligence and wilful misconduct and that BPXP is therefore subject to
enhanced civil penalties. BP does not believe that the evidence at trial
supports a finding of gross negligence and wilful misconduct and has
appealed the Phase 1 ruling.
A provision of $3,510 million was recognized in 2010 for estimated civil
penalties under Section 311 of the Clean Water Act. BP continues to
believe that a provision of $3,510 million represents a reliable estimate of
the amount of the liability if the appeal is successful and this provision,
calculated on the basis of the previous assumptions, has been maintained
in the accounts. If BP is unsuccessful in its appeal, and the ruling of gross
negligence and wilful misconduct is upheld, the maximum penalty that
could be imposed is up to $4,300 per barrel. Based upon this penalty rate
and the district court’s ruling of the number of barrels spilled which, as
noted above is also subject to appeal, the maximum penalty could be up to
$13.7 billion. The court has wide discretion in its application of statutory
penalty factors and we are therefore unable to determine a reliable
estimate for any additional penalty which might apply should the gross
negligence finding be upheld.
Key events
 In April the US Coast Guard ended active clean-up along the Gulf of
Mexico shoreline, with any future identification of residual oil to be
dealt with through the National Response Center process.
 The federal district court in New Orleans ruled in September that the
discharge of oil was the result of the gross negligence and wilful
misconduct of BP Exploration & Production Inc. BP has appealed this
ruling.
 In January 2015 the district court ruled that 3.19 million barrels of oil
were discharged into the Gulf of Mexico and that BP was not grossly
negligent in its source control efforts. We have also appealed this
ruling.
 BP continued to challenge the implementation of the settlement
agreement with the Plaintiffs’ Steering Committee, including issues
around compensation for losses with no apparent connection to
the spill. In December, the US Supreme Court declined BP’s petition
to review the lower court decisions relating to these issues.
 As at the end of 2014, the cumulative pre-tax income statement
charge since the incident amounted to $43.5 billion. This does not
include amounts that BP does not consider possible to measure
reliably at this time. The magnitude and timing of all possible
obligations continue to be subject to significant uncertainty.
 The cumulative charges to be paid from the Deepwater Horizon Oil
Spill Trust fund reached $20 billion in 2014. Subsequent additional
costs are being charged to the income statement as they arise.
BP Annual Report and Form 20-F 201436