BP 2014 Annual Report Download - page 41

Phase 2 – efforts to stop the flow of oil and the volume of oil spilled
The district court issued its ruling on the second phase of the trial in
January 2015. It found that 3.19 million barrels of oil were discharged into
the Gulf of Mexico. In addition, the district court found that BP was not
grossly negligent in its source control efforts. We have also appealed this
Phase 2 ruling.
Penalty phase
The penalty phase of the trial concluded in February 2015. In this phase,
the district court will determine the amount of civil penalties owed to the
United States under the Clean Water Act. This will be based on the court’s
rulings or ultimate determinations on appeal as to the presence of
negligence, gross negligence or wilful misconduct and the volume of oil
spilled, as well as the application of the penalty factors under the Clean
Water Act.
BP is not currently aware of the timing of the district court’s ruling for the
penalty phase.
Plaintiffs’ Steering Committee settlements
BP reached settlements in 2012 with the Plaintiffs’ Steering Committee
(PSC) to resolve the substantial majority of legitimate individual and
business claims and medical claims stemming from the accident and oil
spill. The PSC was established to act on behalf of individual and business
plaintiffs in MDL 2179. During 2014, amounts paid out under the PSC
settlements totalled approximately $600 million.
Individual and business claims
As part of its monitoring of payments made by the court-supervised
programme for the economic and property damages settlement, BP
identified and disputed multiple business economic loss claim
determinations that appeared to result from an incorrect interpretation
of the economic and property damages settlement agreement by the
claims administrator. BP has also raised issues about misconduct and
inefficiency in the facility administering the settlement.
In December 2013 the district court ruled that, for the purposes of
determining business economic loss claims, revenues must be matched
with expenses incurred by claimants in conducting their business even
when the revenues and expenses were recorded at different times. In May
2014, the district court approved the claims administrator’s revised
matching policy reflecting this order and the policy is now in effect. The
PSC has filed a motion with the district court to alter or amend the policy.
In September 2014 the district court denied BP’s motion to order the
return of excessive payments made by the Deepwater Horizon Court
Supervised Settlement Program under the matching policy in effect
before the district court’s December 2013 ruling requiring a claimant’s
revenue to be matched with variable expenses. BP has appealed this
decision to the US Court of Appeals for the Fifth Circuit (Fifth Circuit).
Following the ruling by the district court, which was affirmed by the
Fifth Circuit, that the settlement agreement did not contain a causation
requirement beyond the revenue and related tests set out in an exhibit
to that agreement, the district court in May dissolved the injunction that
had halted the processing and payment of business economic loss claims
and instructed the claims administrator to resume the processing and
payment of claims. In August BP petitioned the US Supreme Court for
review of the Fifth Circuit’s decisions relating to compensation of claims
for losses with no apparent connection to the Deepwater Horizon spill.
In December 2014 the US Supreme Court denied BP’s petition for review.
Business economic loss claims continue to be assessed and paid under
the revised matching policy. The deadline for submitting claims is 8 June
2015.
In September 2014 BP sought to remove Patrick Juneau from his roles as
claims administrator and settlement trustee for the economic and property
damages settlement for reasons including a conflict of interest. This was
denied by the district court and BP has appealed this decision.
Medical claims
The medical benefits class action settlement provides for claims to
be paid to qualifying class members from the agreement’s effective
date. Following the resolution of all appeals relating to this settlement,
the agreement’s effective date was 12 February 2014. The deadline
for submitting claims under the settlement was one year from the
effective date.
Process safety and ethics monitors
Two independent monitors – a process safety monitor and an ethics
monitor – were appointed under the terms of the criminal plea agreement
BP reached with the US government in 2012 to resolve all federal criminal
claims arising out of the Deepwater Horizon incident. Under the terms of
the agreement, BP is taking additional actions, enforceable by the court, to
further enhance the safety of drilling operations in the Gulf of Mexico.
The process safety monitor is reviewing and providing recommendations
concerning BPXP’s process safety and risk management procedures for
deepwater drilling in the Gulf of Mexico.
The ethics monitor is reviewing and providing recommendations
concerning BP’s ethics and compliance programme.
The monitors have interviewed BP employees, reviewed policies and
procedures and made site visits in preparation for their initial reports, which
will be delivered in 2015.
A third-party auditor has also been retained and will review and report
to the probation officer, the US government and BP on BPXP’s
compliance with the plea agreement’s implementation plan. See
bpxpcompliancereports.com for annual updates on BP’s compliance with
the plea agreement.
Other legal proceedings
BP is subject to a number of different legal proceedings in connection
with the Deepwater Horizon incident in addition to the legal proceedings
relating to the PSC settlements and the multi-district litigation proceedings
in New Orleans. For more information see Legal proceedings on page 228.
OPA 90 and other civil claims
BP p.l.c., BPXP and various other BP entities have been among the
companies named as defendants in approximately 3,000 civil lawsuits
resulting from the accident and oil spill, including the claims by several
states and local government entities. The majority of these lawsuits assert
claims under OPA 90, as well as various other claims, including for
economic loss and real property damage, and claims under maritime law
and state law. These lawsuits seek various remedies including economic
and compensatory damages, punitive damages, removal costs and natural
resource damages. Many of the lawsuits assert claims excluded from the
PSC settlements, such as claims for recovery for losses allegedly resulting
from the 2010 federal deepwater drilling moratoria and the related
permitting process. Many of these lawsuits have been consolidated into
MDL 2179.
Alabama, Mississippi, Florida, Louisiana, Texas and various local
government entities have 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 has provided for the current best
estimate of the amount required to settle these obligations. BP considers
most of these claims to be unsubstantiated and the methodologies used to
calculate them to be seriously flawed, not supported by OPA 90, not
supported by documentation and to be substantially overstated.
Securities litigation proceedings
The multi-district litigation proceedings pending in federal court in
Houston (MDL 2185), including a purported class action on behalf of
purchasers of American Depositary Shares under US federal securities
law, are continuing. A jury trial is scheduled to begin in January 2016.
SEC settlement
In connection with the 2012 settlement with the SEC resolving the SEC’s
Deepwater Horizon-related civil claims, in August 2014, the final instalment
of $175 million was paid under the civil penalty of $525 million.
US Environmental Protection Agency (EPA) suspension
and debarment
In March 2014, BP p.l.c., BPXP, and all other BP entities that the EPA had
suspended from receiving new federal contracts or renewing existing ones
entered into an administrative agreement with the EPA resolving all issues
related to suspension or debarment arising from the Deepwater Horizon
incident. The administrative agreement restores the eligibility of BP entities
to enter into new contracts or leases with the US government. Under the
terms and conditions of the administrative agreement, which applies for
five years, BP has agreed to safety and operations, ethics and compliance
and corporate governance requirements.
BP Annual Report and Form 20-F 2014
Strategic report
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