US justice department to drop penalties on BP over Gulf of Mexico oil spill

BP has won an agreement from the US Justice Department that there would be no penalties on the barrels of crude oil that the company was able to recapture during the 2010 Gulf of Mexico spill, that effectively cut the company's potential Clean Water Act fines by around $900 million, or even up to $3.5 billion.

The volume of oil spilled into the Gulf of Mexico had been a matter of intense dispute, hinging on estimates of flow rates with the government also asserting that the blowout on the Macondo exploration well that killed 11 people and sank the Deepwater Horizon drilling rig, caused a spill of 4.9 million barrels.

According to BP the amount spilled was ''at least 20 per cent'' less than that. Also it had pointed out that whatever the size of the spill, it kept 810,000 barrels out of the water by capturing the oil with its containers and vessels. This would see civil penalties applicable to only to 3.1 million barrels of oil.

Even if the higher estimates of the government were to be used, the agreement to exclude the 810,000 barrels would reduce BP's Clean Water Act fines by 16.5 per cent.

''These issues are extremely complicated as a technical matter, and there is still further analysis to do,'' Rupert Bondy, BP's group general counsel, said in a statement.

''But it is clear, based on our analysis so far, that the government's public estimate is simply wrong and overstated by at least 20 per cent.''

BP is prepared to fight over civil penalties with US authorities in court for its role in the Gulf of Mexico oil spill, arguing that the fine it should face should be less than a quarter of the $20 billion estimated by some analysts.