BP Settles Cases for $373 Million

The March 23, 2005, blast at BP's Texas City refinery killed 15 and injured more than 170, leading to a $50 million fine.
The March 23, 2005, blast at BP's Texas City refinery killed 15 and injured more than 170, leading to a $50 million fine. (By Dwight Andrews -- Galveston County Daily News Via Associated Press)
By Lara Jakes Jordan
Associated Press
Friday, October 26, 2007

Global energy giant BP agreed yesterday to pay $373 million to settle criminal and civil charges that it overcharged U.S. propane consumers by millions of dollars and ignored warnings before an oil spill in Alaska and a deadly explosion in Texas.

Additionally, a federal grand jury in Chicago indicted four former BP traders who were taped discussing an alleged scheme to pump up profits by cornering propane markets.

The federal investigation of Europe's second-largest energy company and its executives will continue during a three-year probation period, acting Attorney General Peter D. Keisler said yesterday.

"Obviously, the actions that we're responding to today reflect that there were some very serious problems within the company," Keisler said.

Robert A. Malone, chairman and president of BP America, apologized in a written statement.

"These agreements are an admission that, in these instances, our operations failed to meet our own standards and the requirements of the law. For that, we apologize," Malone said.

The charges against London-based BP and its U.S.-based subsidiaries come in at least three separate cases that federal investigators have been pursuing for several years. They include:

¿ A February 2004 scheme by BP America to inflate the price of propane by buying large quantities of the gas, to be delivered over a Texas pipeline, and then withholding supplies. That forced other buyers in the wholesale market to pay an unnaturally high premium, costing consumers an estimated $53 million.

Ironically, BP did not profit because the financial benefits of the scheme were outweighed by the unexpectedly high costs associated with carrying it out. Under an agreement with the Justice Department to avoid criminal prosecution, BP will pay a $100 million penalty on top of fines amounting to $25 million to the U.S. Postal Service, $125 million to the Commodity Futures Trading Commission and $53 million in restitution.

¿ A March 23, 2005, explosion at a BP refinery in Texas City, Tex., that killed 15 contract employees and injured more than 170. Granta Nakayama, assistant administrator for enforcement and compliance assurance at the Environmental Protection Agency, said BP failed to install equipment required by the Clean Air Act to prevent chemical vapors from being accidentally released.

BP will pay $50 million as part of a felony guilty plea in Texas. Officials said it was the largest criminal fine ever imposed in a Clean Air Act case.

¿ Crude oil leakage discovered in March 2006, estimated at 210,000 gallons, from corroded BP pipelines at Prudhoe Bay, Alaska, North America's largest oil field. BP America will pay $20 million and plead guilty to a misdemeanor violation of the Clean Water Act for the largest crude oil spill on Alaska's North Slope.

Under the agreement, BP will pay a $12 million fine and $4 million in restitution to the state of Alaska. An additional $4 million goes to the National Fish and Wildlife Foundation for Arctic environmental research.

Nakayama said the spill "should not have happened" because BP ignored what he called many warnings about the risks to the ecosystem.

"BP committed serious environmental crimes in our two largest states," Nakayama said. "Every entity that is subject to environmental laws has an obligation to comply. But global companies like BP, with their experience, technical capabilities and financial resources, have no excuse for committing environmental crimes."

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