(MintPress) – British Petroleum is paying big for its catastrophic oil spill that killed 11 and devastated the Gulf of Mexico. After facing 14 felony charges relating to the catastrophic oil spill, the company reached a $4 billion settlement Thursday, drawing debate over whether the oil giant will move forward with a new set of ethical business standards.
While the Justice Department is seemingly coming down hard on the oil industry with this move, it continues to move forward with oil subsidies and oil exploration on U.S. land, which ultimately increases the risk of oil-related burdens on the backs of U.S. citizens. The fracking industry alone has blown up in the U.S. — and there seems to be no end in sight, as companies prepare for profit margins to increase in the wake of the industry.
“This proposed settlement would not deter future crime,” Greenpeace Senior Investigator Mark Floegel said in a press release. “As the other oil giants have resources similar to BP’s, this proposed settlement would give a green light for more reckless behavior in environments across the globe. Shell will now be eager to return to the Arctic Ocean in 2013, knowing that it’s inevitable oil spills will be met with similar slaps on the wrist.”
On Friday, the world watched yet another Gulf oil spill unfold. The day after BP workers were indicted for manslaughter charges, another oil rig in the Gulf of Mexico exploded, killing two. This time it wasn’t BP — it was a rig belonging to Black Elk Energy, a company based in Houston, Texas. It seems the lesson wasn’t learned by the oil industry, as environmental organizations suspected.
The settlement
BP agreed to a $4 billion payout settlement related to the federal criminal charges — just $1 billion less than the profit made in three months during the summer of 2012. BP was facing 11 counts of felony manslaughter, one count of felony obstruction of Congress and violations relating to the Clean Water and Migratory Bird Treaty Acts, as the oil spill was devastating to the native bird population of the Gulf.
The payout is the largest any company has faced in the U.S. to date, highlighting the gravity of the situation. In a press release issued following the plea agreement, Attorney General Eric Holder insinuated the high price of penalties shows the Department of Justice’s commitment in taking the case seriously.
“The $4 billion in penalties and fines is the single largest criminal resolution in the history of the United States and constitutes a major achievement toward fulfilling a promise that the Justice Department made nearly two years ago to respond to the consequences of this epic environmental disaster and seek justice on behalf of its victims,” Holder said.
By pleading guilty to this, BP admitted that negligence caused the catastrophic oil spill of 2010, causing death and widespread environmental destruction with the leaking of 4.9 million barrels of crude oil into the ocean.
So, where is the record-breaking payment going to go? According to the Justice Department, more than half of the $4 billion will be dedicated to the Gulf Coast region. Specifically, $2.4 billion will be dedicated to restoring, acquiring, preserving and conserving the coastal environments in the Gulf of Mexico.
In addition to the monetary damage, two former BP employees are facing felony manslaughter charges relating to the deaths associated with the spill. Donald Vidrine and Robert Kaluza were oil drilling managers for BP on the Deepwater Horizon rig during the time of the spill. The Justice Department is pointing fingers at the former managers, handing down 22 manslaughter charges, collectively, for the 11 deaths.
These two might have a difficult time skirting around a guilty plea, especially considering their former employer’s guilty plea insinuated to the Department of Justice that its two employees in command at the time of the oil disaster operated with negligence.
David Rainey, a former BP explorer, faces one count of obstruction of Congress and one count of making false statements to law enforcement officials. His charges could lead to 10 years in prison, collectively. He, too, will have a difficult time getting away with this, as BP admitted that Rainey withheld documents and provided misleading information to the House of Representatives following the spill.
While still holding BP responsible, the Justice Department is taking aim at individuals, highlighting a new form of accountability that doesn’t allow those deemed responsible to hide behind a corporate powerhouse.
This could create change at the individual level, but will it leave BP with enough of a bruised pocketbook and world image to create lasting change within the company?
The question now is whether the punishment will change more than the content of its profit margin.
Addressing a corrupt climate
At the center of the debate following the spill was whether BP encouraged a culture of corruption created through an emphasis on the bottom line. This was addressed by the Justice Department in the case against the oil company.
“The explosion of the rig was a disaster that resulted from BP’s culture of privileging profit over prudence,” Justice Department Assistant Attorney General Lanny A. Breuer said in a press release. “We hope that BP’s acknowledgment of its misconduct — through its agreement to plead guilty to 11 counts of felony manslaughter — brings some measure of justice to the family members of the people who died on board the rig.”
Tom Zara, Global Practice Leader for Corporate Citizenship at Interbrand, addressed this issue in a recent piece written by Amy Edel-Vaughn. While BP has penalties to pay, Zara points out that business is good, pointing to the fact that BP’s share prices have risen 57 percent since the oil spill in 2010.
With that in mind, what’s the incentive for the company to change its ways?
It could be found in employees who don’t want to spend time behind bars, weighing the options when taking part in what could be questionable behavior. The message the Justice Department sent with individual charges is one that holds individuals accountable, even when operating under the umbrella of a large corporation.
In an effort to show the world that it’s moving on the track forward, BP has unleashed advertisements highlighting the campaign to clean up the Gulf and its role as a job creator in the U.S. To date, the company has spent $52 billion in the U.S. and employs 23,000 Americans.
In a press release issued after the guilty plea, BP admitted to making a rather large mistake, but it ensured its stakeholders that, moving forward, it would be operating under a more ethical set of standards.
“We are committed to building a safer, stronger BP,” Svanberg said. “This work did not begin with the Deepwater Horizon accident and will not end with today’s (Thursday’s) resolution.”
While that could be what shareholders need to hear right now in order to be encouraged to invest, skeptics still point to the company’s large profit margin, showing that, while it has been subject to hefty fines, times are still good for BP. It continues to grow, it continues to succeed. The only incentive now is keeping the public image in a bright light.
That’s tough to do in areas affected by the oil spill. And while the spill occurred two years ago, recent studies show Americans will only learn more about the long-term impact of the disaster, specifically on ocean-dwelling animals in the region. Bottlenose dolphins have been discovered to be experiencing an epidemic of illness, according to the U.S. National Oceanic and Atmospheric Administration.
And while most Americans aren’t pleased with a British oil company destroying American waters, consumers typically don’t think of this when at the pump. It’s for that reason BP continues to see profits roll in.