BP cries foul as judge allows inflation adjustment in Deepwater Horizon case that could total more than $4 billion

NEW ORLEANS – With the penalty phase of the Deepwater Horizon oil spill case complete, BP has called foul as the judge accepted an inflation adjustment to the potential per-barrel fine that may see the maximum penalty increase by more than $4 billion above the statutory limit.

At the urging to the Environmental Protection Agency (EPA), last week U.S. District Judge Carl Barbier, who is overseeing the Deepwater Horizon case, allowed for an inflation adjustment to be figured into calculation of damages assessed to BP under the Clean Water Act (CWA).

Barbier’s ruling came down on the side of the U.S. government against BP’s competing argument concerning the lack of notice and comment period for the inflation adjustment.

“The Court finds, however, that such procedure was unnecessary. The Administrative Procedure Act does not require notice and comment when ‘the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest,’” Barbier’s ruling reads.

In addition, Barbier ruled that the EPA has the ability to institute such a penalty at its sole discretion rather than it being up to the U.S. Attorney General as argued by BP.

“Unless the Attorney General notifies the Administrator within a reasonable time, that he will appear in a civil action, attorneys who are officers or employees of the Environmental Protection Agency shall appear and represent the United States in such action,” Barbier’s ruling states.

While Barbier has yet to rule on the fine BP must pay, the inflation adjustment potentially adds billions to the $35 billion BP has already paid out in fines, compensation and cleanup in the wake of the 2010 oil spill.

BP spokesman Geoff Morrell said the EPA was engaging in overreach and undermining the the U.S. Attorney General’s Office which it maintains has sole discretion, not the EPA, on whether to institute an inflation adjustment.

“We disagree with the Court’s decision, and continue to believe that neither the EPA nor the Coast Guard have the power to independently inflate the maximum penalty Congress intended,'' Morrell said. "At the very least, fair notice was never provided as to which of those two agencies possessed the authority to inflate the penalty amount.”

Morrell said BP hasn't decided whether to appeal Barbier's ruling.

The Clean Water Act, passed in the wake of the 1989 Exxon Valdez oil spill, set a maximum penalty of $3,000 per barrel of oil spilled upon a determination of gross negligence and willful misconduct, of which BP has been accused. However, in recent years the EPA has begun championing inflation adjustments. In the case of BP, the agency recommended a maximum penalty of $4,300 per barrel, substantially above the statutory limit and even more than the $4,000 per barrel penalty the U.S. Coast Guard recommended.

Barbier already ruled that BP spilled 3.10 million barrels of oil, meaning the top fine against the oil giant could balloon from $9.57 billion to $13.7 billion under the inflation adjusted maximum penalty.