The State Of Environmental Crime Enforcement: A Survey Of Developments In 2012

The authors1 of this article, in their latest annual review of environmental crime enforcement, look at the prosecution of the Deepwater Horizon oil rig explosion and spill, which resulted in a guilty plea in 2012 by BP Exploration and Production Inc. and the largest environmental penalty in U.S. history. The authors also discuss the importance of corporate Compliance and Ethics programs, the government's ability to assess the adequacy of those programs, and the lessons federal agencies can learn if they tap into their own enforcement experience as they develop regulatory programs.

DEEPWATER HORIZON UPDATE

The Criminal Plea

On November 15, 2012, the U.S. Department of Justice (DOJ) announced that BP Exploration and Production Inc. had agreed to plead guilty to felony manslaughter charges, obstruction of Congress, and misdemeanor environmental violations for the Company's role in the Deepwater Horizon blowout. Similar to other criminal environmental cases, the charges in the plea focus on both the incident itself, as well as the company's response to the government's investigation into the cause of the incident and extent of the incident's harm.2 Specifically, the company pleaded to 11 felony counts of seaman's manslaughter under 18 U.S.C. § 1115, one felony count of obstruction of Congress under 18 U.S.C. § 1505, one misdemeanor count of negligent discharge under the Clean Water Act, 33 U.S.C. §§ 1319(c)(1)(A) & 1321(b)(3), and one misdemeanor count for violation of the Migratory Bird Treaty Act (MBTA), 16 U.S.C. §§ 703 & 707(a).3 The plea imposes an historic $4 billion in fines and penalties and includes extensive conditions for the five year probation term including the retention of three external monitors, as discussed in more detail below.4

The charges in the plea, and BP's liability, are founded on the alleged actions of three BP employees during and in response to the incident, as discussed in more detail below. The manslaughter, Clean Water Act, and MBTA charges are premised on the actions of Robert Kaluza and Donald Vidrine, BP's well site leaders. Kaluza and Vidrine were indicted in November 2012 on 11 counts of seaman's manslaughter, 11 counts of involuntary manslaughter under 18 U.S.C. § 1112, and one count of negligent discharge in violation of the Clean Water Act for the men's alleged negligence during their supervision of the well's negative pressure test.5 The obstruction charge is premised on the actions of David Rainey, BP's vice president of exploration in the Gulf of Mexico, who was indicted in November 2012 for one felony count of obstruction of Congress and one count of felony false statements relating to his alleged misstatements regarding oil flow rate estimates for the Macondo well.6

The U.S. District Court of the Eastern District of Louisiana accepted the plea on Jan. 29, finding that the plea's charges reasonably reflected the severity of the offense, that the terms of the probation were designed to prevent BP from returning to ''business as usual'' through oversight of BP's compliance with the plea terms and the law, and that the monetary penalty dwarfed all others imposed in the history of the United States.7 Of the $4 billion in fines and penalties imposed by the plea, $1.15 billion is a Clean Water Act fine that must be paid to the Oil Spill Liability Trust Fund and $100 million is an MBTA fine that must be used to carry out wetlands conservation and restoration projects in the Gulf Coast or otherwise benefit migratory bird habitat.8 Of the remaining fines, $2.394 billion will be apportioned by the National Fish and Wildlife Foundation (NFWF) to the affected Gulf Coast states to remedy and eliminate harm to the natural resources caused by the spill, and $350 million will go to the National Academy of Sciences to conduct oil spill response projects designed to remedy harm from the Macondo spill and prevention projects to reduce the risk of future harm.9

The Terms of BP's Probation

The extensive terms of BP's five year probation are also unprecedented in scope. Under the plea, BP must retain three external monitors, create internal monitoring centers, undertake process evaluations and improvements, enhance transparency and reporting measures, institute additional employee training, and devise technology improvement projects. A process safety monitor must be retained by BP to review, evaluate and provide recommendations for the improvement of BP's process safety and risk management procedures, including a major hazard risk review of deepwater drilling-related process safety barriers and mitigations.10 An ethics monitor must be retained to review and provide recommendations for the improvement of BP's Code of Conduct and the company's implementation and enforcement of the code in order to prevent future criminal and ethical violations with respect to interactions with regulatory and enforcement authorities.11 Finally, an independent auditor must be retained to review and report on the terms of BP's compliance with the terms of the probation.12 All three monitors will provide their findings to the government.13

BP must also create a real-time monitoring center for its drilling operations at either its Houston office or another location. The center must monitor well control data for all BP owned or contracted rigs with a subsea blowout preventer (BOP).14 BP must also create a new crisis management organization, including two crisis management centers employing at least six crisis management professionals to assist in oil spill response training and drills.15 Further, BP must maintain a safety organization that has the authority to intervene or stop any operation that it deems unsafe.16

The company must conduct Safety and Environmental Management System (SEMS) Audits, per 30 C.F.R. Part 250, for all of its contracted rigs and platforms, and must require that all its rig contractors join the Center for Offshore Safety, which requires its members to conduct SEMs audits.17 Each time BP, or one of its contractors installs a BOP, a third party must verify that all testing and maintenance of the BOP was performed per the manufacturer's recommendations and the American Petroleum Institute's (API) Recommended Practice 53.18 Moreover, all cement designs used by BP for the primary cementing of casing and hydrocarbon bearing zones in deepwater well operations must be reviewed by BP subject matter experts and provided to the Bureau of Safety and Environmental Enforcement (BSEE) within a reasonable time period.19 Cement slurries must be lab tested and the tests must be witnessed by a BP engineer competent to evaluate the testing or by a competent third party that is independent of the cement provider.20

BP must revise its Oil Spill Response Plan to include provisions regarding maintenance of a supply of dispersant and fire boom for use during an uncontrolled long-term blowout, contingencies for maintaining an ongoing response to such a blowout, measures and equipment necessary to recover discharge on the water's surface, information regarding remote sensing technology to detect oil spills and track oil slicks, communication systems between response vessels and spotter personnel, a shoreline protection strategy, and source abatement and control plans for blowouts.21

The Company must develop a control competency assessment plan for its...