BP Could Face Higher Fines As US Raises Spill Estimates

16th Jun 2010 19:09

By Tennille Tracy Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--As federal officials raise their estimates on the amount of oil flowing out of the Deepwater Horizon spill, BP PLC (BP, BP.LN) and other companies face increasingly higher fines from the federal government. The fines could eventually reach billions of dollars, experts said. Government officials said Tuesday that the spill is releasing 35,000 to 60,000 barrels of oil per day, up from previous estimates of 20,000 to 40,000 barrels. The increase is due in part to BP's latest efforts to contain the spill, which could have affected the amount of oil being released. The higher estimates are likely to translate into higher fines for BP and other companies involved in the disaster, experts said. "Certainly, this is going to be a historic number in terms of penalties," said Jody Freeman, a law professor at Harvard Law School. "There will be very substantial fines, potentially into the billions." Under the Clean Water Act, the federal government can fine the companies between $1,100 to $4,300 per day per barrel of oil. In order to fine the company the highest amount, the government would have to prove "gross negligence and willful misconduct," a U.S. Department of Justice spokesman said. If the government pursues these civil penalties under the Clean Water Act, as many expect, they would add to a growing list of costs that BP incurs as a result of the oil spill. On Wednesday, BP said it would set aside $20 billion in an escrow account to pay for clean-up efforts and damages. Given the costly nature of the spill, Fitch Ratings downgraded its debt rating on BP to "BBB" Tuesday, assigning a rating that's just two notches above junk status. "It's now reached a point where [the costs] contributed to the risk profile in such a way that we felt the risks to BP had changed," said Jeffrey Woodruff, senior director at Fitch. -By Tennille Tracy, Dow Jones Newswires; 202-862-6619; [email protected] (END) Dow Jones Newswires June 16, 2010 14:09 ET (18:09 GMT)