A floodgate of compensation may have opened for the the Niger Delta Farmers who recently took their environmental pollution case to the World Court in the Hague seeking recompense for the near annihilation of community life in the Niger delta through pollution and environmental destruction of land properties.
The legal case, being handled by the World Court in the Hague had created a rumour of a possible compensation precedence by oil giants in the world. Now, that expected precedence has been overtaken.
In a landmark case of compensation and handing down of justice for similar environmental damages, oil giant BP has agreed to a $4.5bn settlement to resolve criminal charges relating to the Gulf of Mexico oil disaster. The agreement to pay the compensation does not even stop criminal actions against BP as the oil giant will l face civil claims from the US government.
The compensation is coming just as the company pleaded guilty to 14 criminal charges brought by the American Department of Justice, 11 of which were counts of manslaughter.
The $4bn settlement relating to those charges includes a fine of $1.256bn, the largest financial penalty ever imposed by US authorities.
BP is also paying a further $525m for civil fraud charges brought by the Securities and Exchange Commission, the financial regulator.
Bob Dudley, chief executive, said in a statement: “We apologise for our role in the accident, and as today’s resolution with the US government further reflects, we have accepted responsibility for our actions.”
The settlement marks another step forward for the company as it attempts to resolve its liabilities over the 2010 Deepwater Horizon disaster. The payments raise BP’s estimated spill costs by $3.85bn to $42bn.
However, it still faces actions for civil penalties and damages from federal, state and local authorities in a case scheduled to go to trial next February.
BP had hoped to resolve all civil and criminal actions in the one case, but the talks have been complicated by disagreements among the various parties over how a settlement should be dispersed.
Eric Holder, US attorney-general, said the government would continue to push for billions of dollars more in civil penalties and natural resource damages.
“We’re looking forward to the trial,” he said, “in which we intend to prove that BP was grossly negligent in causing the oil spill.”
If BP is found grossly negligent, its penalties under the Clean Water Act alone could reach $20bn.
The charges to which the company pleaded guilty include 12 felonies: 11 counts of negligence-related manslaughter of seamen, for the 11 men killed on the rig, and one count of obstruction of Congress for not revealing full details of the estimated size of the spill in a response to Representative Ed Markey.
BP also accepted two misdemeanor charges under anti-pollution laws.
Two BP supervisors who were on board the Deepwater Horizon have also been charged with manslaughter and alleged violations of the Clean Water Act. A former BP executive has been charged with allegedly hiding information from Congress.
The $1.256bn fine for BP is larger than the previous record of $1.2bn paid by Pfizer in 2009 as part of a deal to resolve charges over the illegal promotion of an anti-inflammatory drug
However, the company said the settlement was “consistent with BP’s position in the ongoing civil litigation that this was an accident resulting from multiple causes, involving multiple parties, as found by other official investigations”.
It added that it would “continue to vigorously defend itself against all remaining civil claims and to contest allegations of gross negligence in those cases”.
The SEC action related to the misreporting of the estimated size of the spill by BP in the early days after the accident.
Other companies involved in the disaster, including Transocean, the owner and operator of the Deepwater Horizon rig, and Halliburton, the contractor that supplied cement intended to secure the well, are now likely to come under pressure to reach their own settlements.
Halliburton said it remained confident that “all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications”.
Transocean has said it has been in talks with the DoJ over a possible $1.5bn settlement of the authorities’ claims against it, which would be paid for out of a $2bn provision the company set aside for the costs of the spill.
The Niger Delta environmental catastrophie however may have seen the current BP case as a catalyst as it has been described as a tragedy of higher magnitude.
In the environmental case, filed in a local court in The Hague where Shell has its joint global headquarters, the four farmers are seeking to make Shell and other corporations responsible for pollutions resulting from three oil spills in 2004, 2005 and 2007.
The four Plaintiffs are four Nigerians supported by the environmental campaign group Friends of the Earth.
They are fishermen and farmers, seeking unspecified compensation and claiming that their life is gradually exterminating as they can no longer feed their families because the area has been polluted with oil from Shell’s pipelines and production facilities.
With around 31 million inhabitants, the Niger Delta, which includes the Ogoniland region, is one of the top 10 wetland and coastal marine ecosystems in the world and is a main source of food for the poor, rural population.
It’s not only environmental groups who have been critical of Shell’s Nigerian operations.
Last year, the United Nations said in a report the government and multinational oil companies, particularly Shell, were responsible for 50 years of oil pollution that had devastated the Ogoniland region.
In one community near an oil pipeline, drinking water was contaminated with benzene, a substance known to cause cancer, at levels over 900 times above the World Health Organization guidelines.
Shell also faced legal action this month in the United States, where the U.S. Supreme court is hearing a case in which Nigerian refugees accused it of aiding the Nigerian military in the torture and killing environmentalists in the 1990s. The incident happened under the reign of General Sanni Abacha who initiated the military run over of a village where many were killed to create way for oil exploration.
Source additions: FT, Reuters