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BP Faces Years of Investigation, Lawsuits Over Massive Oil Spill

Aug 9, 2010 | Parker Waichman LLP

While the gushing well responsible for the massive BP oil spill appears to be capped, the fallout from the disaster could continue to haunt BP far into the future. In addition to the costs associated with cleanup of the spill – the worst in US history – the legal issues BP must contend with could take years to resolve.

The company finished cementing the well late last week, and said today that pressure testing has shown that there was an effective cement plug in the casing. BP still plans to complete relief well that would intersect the damaged and pump in more mud and cement from the bottom if necessary. The relief well will be finished in about 10 days.

The BP oil spill began with an explosion aboard the Deepwater Horizon oil rig on April 20. According to government estimates, 4.9 million barrels of crude escaped from the well before a containment device was placed over it on July 15. Though oil is no longer pouring into the Gulf, cleanup is nowhere near finished and could last for years.

So far, the oil spill has cost BP $6.1 billion. That total includes $319 million in compensation payments to businesses and individuals affected by the spill. About 145,000 claims had been submitted as of August 7, and 103,900 payments have been made, according to the company.

BP, Transocean Ltd., Halliburton and other companies involved in the Deepwater Horizon endeavor face multiple investigations over the disaster that have the potential to last years. According to a report in The Wall Street Journal, The U.S. Justice Department has opened a criminal probe into the spill that could involve more than BP. The Bureau of Ocean Energy Management, the federal offshore regulator, is conducting hearings into the industry’s preparedness for another spill and is expected to issue rules governing offshore drilling. The House Energy and Commerce Committee is continuing its probe of the spill and committee leaders hope to issue a report in December, the Journal said.

The US Coast Guard, an independent commission appointed by President Obama and the federal Chemical Safety Board are also probing the incident. In addition, BP and the other firms face scores of civil lawsuits stemming from the spill.

BP could also face some pretty hefty fines from the US government. Under the Clean Water Act, BP could be levied a fine of $1.1 million for every barrel of oil spilled. If the spill is determined to be the result of gross negligence, the fine could increase to $4.3 million per barrel.

While the oil spill is costing BP big, the company has not given up on the oil located in the area where the blowout occurred. “There’s lots of oil and gas here,” Doug Suttles, BP’s chief operating officer said Friday. “We’re going to have to think about what to do with that at some point.”

According to the Associated Press, the oil in the reservoir could be worth as much as $4 billion.

As for the blown-out well that caused the disaster, the Interior Department says BP will not be allowed to ever use it again.

“Under no circumstances are we going to allow them to reopen the well to extract oil and gas,” department spokeswoman Kendra Barkoff said on Friday.

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