BP 2015 Annual Report Download - page 245

to intervene in the action. On 31 January 2013, the complaint was
transferred to MDL 2179. Under the terms of the proposed Consent
Decree, the United States and Gulf states would covenant not to pursue
claims against BP under the FCA.
Criminal settlement with the DoJ and settlement with the SEC
On 15 November 2012, BP announced that it reached agreement with
the US government, subject to court approval, to resolve all federal
criminal charges and all claims by the SEC against BP arising from the
Deepwater Horizon accident, oil spill and response.
On 29 January 2013, the US District Court for the Eastern District of
Louisiana accepted BP’s pleas regarding the federal criminal charges, and
sentenced BP in connection with the criminal plea agreement. Pursuant
to that sentence, BP is required to pay $4 billion, including $1,256 million
in criminal fines, in instalments over five years. Under the terms of the
criminal plea agreement, a total of $2,394 million is required to be paid to
the National Fish & Wildlife Foundation (NFWF) over five years. In
addition, $350 million is required to be paid to the National Academy of
Sciences (NAS) over five years. BP made its required payments that
were due in March and April 2013, January 2014, January 2015 and
January 2016 totalling $2.1 billion. BP was required to serve a term of
five years’ probation and agree to certain equitable relief relating to BP’s
risk management processes in order to further enhance the safety of
drilling operations in the Gulf of Mexico. BP also agreed to maintain a
real-time drilling operations monitoring centre and to undertake several
initiatives with academia and regulators to develop new technologies
related to deepwater drilling safety. The resolution also provided for the
appointment of two monitors, a process safety monitor, to review and
provide recommendations concerning BPXP’s process safety and risk
management procedures for deepwater drilling in the Gulf of Mexico and
an ethics monitor, to review and provide recommendations concerning
BP’s ethics and compliance programme. BP has also agreed to retain an
independent third-party auditor to review and report to the probation
officer, the DoJ and BP regarding BPXP’s compliance with the key terms
of the plea agreement. Under the plea agreement, BP has also agreed to
co-operate in ongoing criminal actions and investigations, including
prosecutions of four former employees who have been separately
charged.
In its resolution with the SEC, BP has resolved the SEC’s Deepwater
Horizon-related claims against the company under Sections 10(b) and
13(a) of the Securities Exchange Act of 1934 and the associated rules. BP
agreed to a civil penalty of $525 million, the last instalment of which was
paid in August 2014, and consented to the entry of an injunction
prohibiting it from violating certain US securities laws and regulations.
US Environmental Protection Agency matters
On 13 March 2014, BP, BPXP, and all other temporarily suspended BP
entities entered into an administrative agreement with the US
Environmental Protection Agency (EPA) resolving all issues related to
suspension or debarment arising from the Incident. Under the terms and
conditions of the administrative agreement, which will apply until
13 March 2019, BP may enter into new contracts or leases with the US
government but must comply with a set of safety and operations, ethics
and compliance and corporate governance requirements.
US Department of Interior matters
On 12 October 2011, the US Department of the Interior Bureau of Safety
and Environmental Enforcement issued to BP, Transocean, and
Halliburton Notification of Incidents of Noncompliance (INCs). The
notification issued to BP is for a number of alleged regulatory violations
concerning Macondo well operations. On 7 December 2011, the Bureau
of Safety and Environmental Enforcement issued to BP a second INC for
five alleged violations related to drilling and abandonment operations at
the Macondo well. BP filed an administrative appeal with respect to the
first and second INCs and filed a joint stay of proceedings with the
Department of Interior with respect to both INCs. Pursuant to the
proposed Consent Decree with the United States (see above), if entered
by the court, BP would withdraw its appeals within 15 days of the
effective date of the Consent Decree, and the INCs would then be fully
and finally resolved.
Pending investigations and reports relating to the Deepwater
Horizon oil spill CSB investigation
The US Chemical Safety and Hazard Investigation Board (CSB) has
indicated that it plans to release the final two volumes of its four-volume
report on its investigation into the Incident (concerning the role of the
regulator in the oversight of the offshore industry and organizational and
cultural factors) in March 2016.
Other legal proceedings
FERC and CFTC matters
The US Federal Energy Regulatory Commission (FERC) and the US
Commodity Futures Trading Commission (CFTC) have been investigating
several BP entities regarding trading in the next-day natural gas market at
Houston Ship Channel in 2008. On 5 August 2013, the FERC issued an
Order to Show Cause and Notice of Proposed Penalty directing BP to
respond to a FERC Enforcement Staff report alleging that BP manipulated
the next-day, fixed price gas market at Houston Ship Channel from mid-
September 2008 to 30 November 2008. The FERC Enforcement Staff
report proposed a civil penalty of $28 million and the surrender of
$800,000 of alleged profits. The Administrative Law Judge ruled on
13 August 2015 that BP manipulated the market by selling next-day, fixed
price natural gas at Houston Ship Channel in 2008 in order to suppress
the Gas Daily index and benefit its financial position. BP filed an appeal to
the initial decision with the FERC on 14 September 2015 and the Office
of Enforcement filed an opposing brief on 5 October 2015.
Canadian Pipeline Nominations
The CFTC is currently investigating certain practices relating to crude oil
pipeline nominations procedures on Canadian pipelines. On 17 November
2014, the CFTC Enforcement Staff notified BP that it intends to
recommend an enforcement action naming certain parties, including
several BP entities, alleging violations of the anti-fraud and false reporting
provisions of the Commodity Exchange Act in connection with these
nomination procedures and related trades. On 17 December 2014 BP
submitted a detailed defence responding to the allegations in the notice
and challenging the CFTC’s jurisdiction over the alleged conduct.
Investigations by the FERC and CFTC into BP’s trading activities continue
to be conducted from time to time.
CSB matters
In March 2007, the CSB issued a report on the March 2005 explosion and
fire at the Texas City refinery incident. The report contained
recommendations to the BP Texas City refinery and to the board of
directors of BP. To date, the CSB has accepted that all but one of BP’s
responses to its recommendations have been satisfactorily addressed.
BP and the CSB are continuing to discuss the remaining open
recommendation with the objective of the CSB agreeing to accept this as
satisfactorily addressed as well.
OSHA matters
On 4 March 2014, BP and the US Occupational Safety and Health
Administration (OSHA) reached agreement in relation to the remaining
30 citations issued by OSHA to the Texas City refinery in 2009 related to
the Process Safety Management (PSM) standard. This followed an earlier
settlement of approximately 400 Texas City citations. The agreement
links the outcome of these citations to the ultimate outcome of certain
specified Toledo citations which address similar issues (see below). If the
31 July 2013 decision of the Administrative Law Judge in relation to the
similar Toledo issues is ultimately upheld when a final decision is
entered, OSHA has agreed to dismiss the remaining Texas City citations.
If the 31 July 2013 decision is ultimately overturned, BP has agreed to
pay a penalty not exceeding $1 million to resolve the remaining Texas
City citations.
On 8 March 2010, OSHA issued 65 citations to BP Products North
America Inc. (BP Products) and BP- Husky Refining LLC (BP-Husky) for
alleged violations of the PSM standard at the Toledo refinery, with
penalties of approximately $3 million. These citations resulted from an
inspection conducted pursuant to OSHA’s Petroleum Refinery Process
Safety Management National Emphasis Program. Both BP Products and
BP-Husky contested the citations. The outcome of a pre-trial settlement
of a number of the citations and a trial of the remainder was a reduction
in the total penalty in respect of the citations from the original amount of
approximately $3 million to $80,000. The OSH Review Commission
BP Annual Report and Form 20-F 2015 241
Additional disclosures