- Associated Press - Tuesday, September 28, 2010

NEW ORLEANS (AP) — BP and the Obama administration are discussing a possible settlement over fines for the company’s massive Gulf of Mexico oil spill in an effort to avoid a costly legal fight that would delay that money from reaching the affected states, a congressman said Tuesday.

Rep. Steve Scalise, Louisiana Republican, told the Associated Press that members of his staff got information about the talks while working on oil-spill-related legislation he is proposing. Mr. Scalise said the goal of the talks between BP PLC and the government is to reach a deal instead of having to fight it out in court.

He said the two sides appear to be at odds over whether BP should be considered grossly negligent for the spill, a finding that could mean higher fines. There was no immediate comment from BP or the Justice Department.

Mr. Scalise made his comments to AP after appearing at a news conference with Navy Secretary Ray Mabus, who was in New Orleans to discuss his report recommending that a significant portion of the possible fines for companies involved in the spill be placed in a fund for Gulf restoration. He said it would be up to Congress to determine how much of the fines to set aside.

An April 20 rig explosion in the Gulf killed 11 workers and led to 206 million gallons of oil spewing from BP’s undersea well.

Penalties can be levied against BP, which owned the well and was leasing the rig that exploded, under a variety of environmental protection laws, including fines of up to $1,100 under the Clean Water Act for each barrel of oil spilled. If BP were found to have committed gross negligence or willful misconduct, the fine could be up to $4,300 per barrel.

That means that, based on the 4.9 million barrels released from the Macondo well, BP could face civil fines under the Clean Water Act alone of between $5.4 billion and $21.1 billion.

Dedicating fines levied against BP and other companies involved in the Deepwater Horizon accident to restoration and to Gulf states directly, which the Mabus report also calls for, will require a change in law. Currently, Clean Water Act fines go into a trust fund to pay for oil-spill cleanups.

Mr. Scalise and Sen. Mary L. Landrieu, Louisiana Democrat, support legislation that would require that at least 80 percent of the civil and criminal penalties charged to BP under the Clean Water Act be returned to the Gulf Coast for long-term economic and environmental recovery. The bill is still pending.

Richard Stewart, who led the government’s prosecution of Exxon for the Exxon Valdez incident, told the national oil-spill commission Tuesday that criminal charges and stiff civil penalties likely will drive BP to settle. Mr. Stewart now teaches law at New York University.

“It’s a negotiation,” Mr. Scalise said. “If they can’t reach an agreement, then it would go to court. We would be able to get that money to the Gulf Coast quicker if they would agree to it.”

In New Orleans, Mr. Mabus said that under his plan, the money would not have to be spent solely on repairing damage caused by the oil spill. Rather, he said, he envisions some of it being spent on repairing wetlands damaged over the years by the construction of canals to serve coastal oilfields.

Mr. Mabus said that with the equipment and manpower already in the Gulf repairing damage from the oil spill, it would be cheaper and more efficient to also repair the coastline from other damage it has suffered over the years.

Mr. Mabus is proposing that a panel be set up to administer any money set aside from the fines for coastal restoration. He said there should be a federal and state chair on the panel.

A senior administration official, speaking on condition of anonymity because the announcement hadn’t yet been made, said the White House already has endorsed Mr. Mabus‘ proposal.

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