War of words heats up ahead of BP's court case

BP's part in the Macondo well disaster in the Gulf of Mexico in 2012 is set to flare up again after the US Department of Justice's attorneys accused the British company of a 'culture of corporate recklessness'.

The Financial Times (FT) reports that the Department of Justice is intent on throwing the book at the UK company for alleged gross negligence and wilful misconduct, citing email exchanges among BP staff prior to the explosion on the Deepwater Horizon oil rig as evidence of a callous disregard for proper safety procedures.

The court showdown between the DoJ and BP is set to commence on January 14th of next year. If the DoJ can establish BP was grossly negligent, the penalties under the Clean Water Act would rise from a maximum of $7bn to a maximum of $21bn, depending on how much oil was spilled, the FT reports. The monetary pain would not end there, however, as compensatory and punitive damages would be applied in addition to the fine.

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Last month, BP asked the court to approve its $7.8bn settlement with fishermen in the Gulf of Mexico and other people in the area who suffered from the oil spill, but judging by a scathing memo filed this week by the DoJ with the New Orleans court, the US authorities are not impressed with BP's settlement, and want to ensure that it does not preclude the court from setting a higher settlement price.

"BP's cherry-picked assertions of robust recovery are at best premature judgements on the health of the overall gulf ecosystem," the DoJ claims.

The DoJ places more credence in a "multi-year, multi-million dollar natural resource damage assessment" currently being undertaken, which it says is "already showing indication of harm to natural resources".

BP is not the only target of the DoJ's ire, as the memo also accuses Deepwater Horizon rig owner Transocean of gross negligence for its part in a critical test of the well's safety.

"That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence," the DoJ's memo said.

The Deepwater Horizon rig was leased by BP from Swiss firm Transocean. It blew up on April 20th, 2010, killing 11 people and spilling tons of crude oil into the Gulf of Mexico.

BP has accepted it was culpable for its part in the tragedy but its internal report stressed that decisions made by "multiple companies and work teams" - namely Transocean and US oilfield support services outfit Halliburton - contributed to the accident.

Transocean refuted BP's claims, saying BP's well design was "fatally flawed" as a result of penny-pinching by the UK company.

Halliburton, which was the cement contractor on the Macondo well, also carped about BP's report, saying it contained "a number of substantial omissions and inaccuracies".

Tony Hayward, BP's Chief Executive Officer at the time of the disaster, attempted to sum up the litany of failures which led to the explosion: "To put it simply, there was a bad cement job and a failure of the shoe track barrier at the bottom of the well, which let hydrocarbons from the reservoir into the production casing."

"The negative pressure test was accepted when it should not have been, there were failures in well control procedures and in the blowout preventer; and the rig's fire and gas system did not prevent ignition," Hayward said.

BP's shares fell to 420p in the first hour of trading on Wednesday from 436.6p overnight.

JH