BP Settles U.S. Charges

BP has agreed to pay $373.5 million in fines and restitution to settle three federal criminal investigations and will spend another $415 million on safety upgrades and improvements at its operations in Texas and Alaska to prevent future chemical releases and oil spills.

"BP committed serious environmental crimes in our two largest states, with terrible consequences for people and the environment," Environmental Protection Agency Assistant Administrator for Enforcement & Compliance Assurance Granta Y. Nakayama stated at an Oct. 25 news conference. "The agreement sends a message that these types of crimes will be prosecuted."

BP agreed to plead guilty to a violation of the Clean Air Act and will pay a record $50 million fine for the explosion in 2005 that killed 15 workers and injured more than 170 others at its Texas City, Texas, refinery. The company said it will undertake a facility-wide study of the refinery's safety valves and renovate its flare system to prevent excess emissions at an estimated cost of $265 million.

BP will also pay a $12 million fine for spilling 200,000 gal of crude oil onto the Alaskan tundra and onto a frozen lake in March 2006, resulting in the largest spill ever on the North Slope.

For the Alaska spill, BP will plead guilty to one misdemeanor of the Clean Water Act and pay $4 million to the National Fish & Wildlife Foundation to support research on the North Slope and $4 million in restitution to the state of Alaska, which has agreed not to prosecute the company. BP is also required to replace 16 miles of pipeline at an estimated cost of $150 million.

To settle allegations of manipulating propane prices three years ago, BP will pay fines and restitution totaling just over $303.5 million, including a criminal penalty of $100 million. Four former BP traders have been indicted in Chicago on charges related to the case.

"These agreements are an admission that, in these instances, our operations failed to meet our own standards and the requirements of the law. For that, we apologize," says BP America Chairman Robert A. Malone. Since the violations occurred, he says, BP has made "real progress in the areas of process safety performance and risk management, but there is more to do and we are committed to doing it."

The $50 million penalty for the deadly refinery explosion, which is based on a mathematical formula that doesn't account for loss of life, is the largest criminal fine ever assessed against a company for violating the Clean Air Act. It is also the first criminal prosecution under a provision that requires refineries and chemical plants take steps to prevent accidental releases.

"If our approach to process safety and risk management had been more disciplined and comprehensive, this tragedy could have been prevented," Malone says. "We did not provide our people with systems and processes that would have enabled them to appreciate the risk of a catastrophic release. We deeply regret the loss of life, the injuries, and the community disruption caused by the explosion."

About 4,000 civil lawsuits were filed against BP after the Texas City explosion, most of which the company has settled, including all that involved fatalities. Hundreds more that involve injuries or property damage are still pending. The company has set aside approximately $1.6 billion to resolve lawsuits.