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BP fine shouldn’t be excessive

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How much should BP pay for the carelessness that led to the disastrous Deepwater Horizon oil spill in 2010?

Last week the giant oil company, the federal government and some Gulf Coast states started wrangling over that question. The parties gathered in New Orleans to begin a federal civil trial, the first phase of a process that will determine the size of the Clean Water Act fines the company must pay.

If the court finds that BP was merely negligent, the company could pay as much as $3.5 billion in fines. If the judge finds that BP was grossly negligent, the company could have to pay as much as $17.6 billion.

Whatever the figure, it would be on top of the $20 billion to $30 billion that BP already has distributed or committed to pay. It would also settle only one of many outstanding legal claims against the company. BP is still liable to pay for the environmental injury it caused, according to the results of a process called the Natural Resources Damage Assessment. Gulf states also recently demanded a whopping $34 billion in economic damages. Given all of these, the Economist calculates, BP’s total Deepwater Horizon payout could reach an incredible $90 billion.

A bill anywhere near that large is impossible to justify.

Millions of barrels of oil spewed for weeks into one of the world’s most productive fisheries, the full effects of which are still the subject of heated debate. Environmentalists fret about what extant oil will do to already eroding coastal wetlands, as well as the gulf’s complex food chain. BP must pay to clean up the environmental damage it did. This is important both to ensure that restoration efforts have the funding they need and to avoid encouraging others to take unwarranted risks.

But, in establishing BP’s punishment, federal and state governments shouldn’t try to extract excessive punitive fines. Even if BP is found to have been grossly negligent, it does not follow that it must face the harshest punishment the law allows. The principle of fairness does not justify treating the company like a piggy bank for gulf-state budgets, discounting the mobilization of men and money the company directed following the spill.

Neither does good sense. The government should welcome economically useful investment and enterprise, and seeking a maximal punishment for BP would do the opposite, discouraging even firms that would behave more responsibly than BP did in the run-up to the Deepwater Horizon blowout.

Instead of unending court proceedings, the parties should strike the proper balance in a settlement of their various claims. The sooner the better; restoration efforts get only harder the longer the wrangling continues.

 

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