BP Could Face Massive Fines Under Clean Water Act

Washington — If the Obama administration is serious about holding BP and others responsible for the Gulf of Mexico oil spill, it can start with the federal Clean Water Act, which could allow the federal government to collect as much as $4.7 billion in civil fines just for the oil that’s spilled so far.

Even if the courts allow the fines, however, there are no guarantees that the money would go to the cleanup and economic recovery of the Gulf Coast, according to legal experts.

Though other laws could come into play, the Clean Water Act may provide the best avenue for legal action. After the 1989 Exxon Valdez spill in Alaska, the law was beefed up to include harsh civil and criminal penalties for oil spills.

Since 1985, one general discharge permit has covered all offshore oil operations in the Gulf; individual site-by-site discharge permits aren’t issued. A company that wants to operate in the Gulf applies for coverage under the general permit.

The permit covers everything from drilling fluids to bilge water, but there are only passing references to oil discharges such as those in a spill. The permit bars the discharge of “free oil,” but its emphasis is on other pollutants.

Even so, the permit could become the underpinning for lawsuits because, among other things, it bars discharges of benzene, naphthalene, arsenic, mercury and other toxic chemicals that could be found in the crude oil.

In addition, the permit discourages the use of dispersants because they can “disperse and emulsify oil, thereby increasing the toxicity.” BP already has used thousands of gallons of dispersants.

“Failure to comply with the permit is a violation of the Clean Water Act,” said Tracy Hester, the director of the University of Houston’s Environment, Energy and Natural Resources Center. “It would be the foundation of any enforcement action. There are tons of lawyers looking at this.”

Attorney General Eric Holder visited the Gulf Coast last week and said the Obama administration was prepared to pursue legal action — civil and criminal — against those responsible for the spill.

Environmental groups want to keep the pressure on Holder to act. They’ve notified BP that they intend to file several lawsuits under the Clean Water Act, which allows citizen lawsuits and requires 60 days’ notice of the intent to sue.

In a certified letter to Andrew Inglis, the chief executive of BP Exploration and Production, three environmental groups charged that the company violated the discharge permit.

“The general permit does not authorize the discharge of oil from this pipe or any other sources at the rig,” Joel Waltzer, a New Orleans attorney for the Gulf Restoration Network, the Louisiana Environmental Action Network and Environment America, said in the letter to Inglis.

The groups also allege that BP violated the permit by failing to properly “operate and maintain” the rig at all times and failing to install flow measurement devices to track the flow of oil from the pipe.

“Obviously this has been a violation of the permit,” Waltzer said in a phone interview.

Waltzer said he was surprised that a single blanket permit covered all oil drilling operations in the Gulf.

“If you stuck something the size of the Deepwater Horizon on land, it would definitely require its own permit,” Waltzer said, adding that even though the permit was updated regularly it didn’t envision ultra-deep wells such as the one the Deepwater Horizon was drilling or the possibility of a massive oil spill.

Waltzer said he still hoped that the Environmental Protection Agency, the Coast Guard and the Justice Department would take the lead in pursing legal action.

“This is a backstop,” Waltzer said of the groups’ notice to sue. “If they drop the ball, we will pick it up.”

The Center for Biological Diversity also has notified BP and Transocean Ltd., which owned the Deepwater Horizon, of its plan to sue under the Clean Water Act. In its letter, the San Francisco-based group alleged that BP had violated the oil spill provision in the law and provisions of the discharge permit.

“The government probe is a start, but it has taken far too long to get rolling,” said Miyoko Sakashita, oceans director for the Center for Biological Diversity.

EPA officials referred questions about possible legal action under the Clean Water Act to the Justice Department.

“We are looking for possible violations of the law,” Andrew Ames, a Justice Department spokesman, said in an e-mail, adding that he couldn’t discuss the timing of a possible case. “Each case is unique.”

The Clean Water Act allows the U.S. to seek civil fines for every drop of oil that’s spilled into the nation’s navigable waters. Under the act, the basic fine is $1,100 per barrel spilled.

If a judge finds that the spill was a result of gross negligence, the fines can rise to $4,300 a barrel. Gross negligence has been defined as highly reckless disregard.

The civil fines would be on top of any criminal fines. BP also owes economic damages, which are capped at $75 million. The company has said it will pay all “legitimate” economic claims it receives even if they exceed the cap.

Some experts have estimated that BP could face up to $10 billion in liabilities.

“Who knows how this will play out?” said Oliver Houck, a Tulane University law professor who specializes in environmental law.

Houck said BP and others faced exposure from the families of the 11 oil rig workers who were killed and possible administrative, civil and criminal fines along with reimbursing the government for the cost of the response to the spill.

If the government does collect civil fines, Houck said, he’s not sure where the money would go.

“I don’t know if it goes in a compulsory fund or not,” he said. “I doubt it.”

The University of Houston’s Hester agreed.

“The question is where do the penalties go?” Hester said. “Usually they go to the Treasury. There is nothing that says they have to go to cleanup costs.”

Other laws that could come into play include the Oil Pollution Act, the Endangered Species Act, the Marine Mammal Protection Act and the Migratory Bird Treaty Act.