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Bloomberg: BP Must Wait to Resolve Charges in Texas Blast Plea (Update3)

By Laurel Brubaker Calkins and Margaret Cronin Fisk

Feb. 4 (Bloomberg) — BP Plc will have to wait at least two weeks to learn how much it must pay to resolve criminal charges linked to 15 death in a 2005 explosion at its Texas refinery.

Blast victims urged U.S. District Judge Lee Rosenthal in Houston today to reject the plea, calling the $50 million deal inadequate to deter BP, Europe’s second-largest oil company, from further safety violations. They’re seeking as much as $3.2 billion in fines and court supervision of safety improvements at the refinery, BP’s largest.

BP asked Rosenthal to accept the plea deal, which includes three years of probation, as sufficient punishment for air- pollution violations related to the deadly explosion. The London-based energy firm told the judge in court filings it spent more than $1 billion and pledged billions more to upgrade and repair the refinery to meet industry standards.

“We cannot change the past nor undo the harm done by the explosion and fire,” Keith Casey, current plant manager at the Texas City refinery, said today at a hearing. “Instead, we have worked with state and federal agencies to determine what went wrong, to share what we have learned and to prevent something like this from happening again.”

Victims and their families told Rosenthal that BP needs additional punishment to deter it from future safety violations.

Daughter’s Request

“If the purpose of punishment is to give incentive to the wrongdoer to change their ways and do the right thing, this agreement utterly fails,” said Eva Rowe, whose parents were killed in the 2005 explosion. “$50 million is less than one month’s worth of profit for this one BP plant,” she told the judge.

Rosenthal today reminded lawyers she doesn’t have authority to alter BP’s plea deal or substitute the multibillion-dollar penalties victims have urged her to levy on the company.

“I’m not authorized or permitted to insert myself into the plea bargaining process,” she said. “I must not evaluate a hypothetical plea that hasn’t been entered or that someone else, or indeed one that I, might prefer.”

After hearing victims’ statements and legal arguments in support and opposition to BP’s plea, Rosenthal gave lawyers two weeks to file additional briefs. She strictly limited the arguments to what victims’ losses can be linked to BP’s criminal conduct and should be included in any fine calculation. After reading these, Rosenthal said she will accept or reject the plea deal, leaving BP to decide whether to try to negotiate another one or demand a trial.

`New Stuff’

“These issues are being raised because this is new stuff,” Rosenthal said of allowing victims to protest BP’s plea deal under the Crime Victims Rights Act of 2004, which gives victims the right to confer and comment on plea and sentencing issues. “These are new areas of the law, and I don’t see how I’m impeding the process by inviting 10 more pages of briefs.”

The explosion occurred March 23, 2005, when an octane- boosting unit overflowed as it was being restarted. Gasoline spewed from an inadequate vent system and vapors pooled under a nearby trailer where contractors were meeting. A stray spark ignited a blast that injured hundreds and destroyed windows five miles away.

U.S. Occupational Safety and Health Administration inspectors fined BP $21 million and ordered the company to conduct a comprehensive safety audit and make all necessary repairs after the 2005 explosion. U.S. Chemical Safety Board investigators said BP endangered workers by cutting maintenance and safety budgets in order to maximize profits.

4,000 Claims

The London-based energy firm has paid more than $1.6 billion to settle the bulk of roughly 4,000 injury and property claims stemming from the explosion. About 1,250 claims are pending, some of which are scheduled to be tried in Texas state court in Galveston in May.

The fine isn’t large enough to deter a multibillion-dollar corporation from operating the plant in an unsafe manner, victims’ lawyers said in court papers. A court-appointed monitor is required to insure full implementation of repairs and safety procedures that are already required by law, they said.

Victims urged Rosenthal to reject BP’s guilty plea, saying in their filings that a fine of $2 billion to $3.2 billion is more appropriate punishment because fines can be legally assessed at twice the gain or loss from a crime.

Victims’ Argument

The victims argued the fine should be twice the $1 billion in profits company records show BP earned at the Texas City refinery for 14 months before the blast. Since BP’s plea covers the period stretching back to the company’s 1999 acquisition of the refinery, victims suggested the fine may be higher, calculated on six years of BP’s earnings from the site.

Victims’ lawyers also argued in court filings that a $3.2 billion fine, or double the amount BP has spent on settling civil damage claims, could be an appropriate punishment.

Even if the legal definitions Rosenthal requested in today’s briefings limit BP’s fine to victims’ out-of-pocket expenses including medical bills, funeral expenses, lost wages and property damage that can be directly linked to BP’s criminal conduct, victims’ lawyer Brent Coon said that fine would “far exceed the number they have now.”

“I estimate it would be in the hundreds of millions of dollars, at minimum,” Coon told reporters after the hearing. Such a tally would be easy to provide the judge because “BP already has those numbers for most of the people out there,” Coon said.

Blow-Down Stacks

Federal prosecutors told Rosenthal their $50 million fine represents a percentage of BP’s costs to remove all its blow- down stacks — the type of vent system implicated in the explosion — from the Texas City refinery and to relocate all contractors to permanent office quarters away from the site.

Don DeGabrielle, the U.S. Attorney in Houston, defended the fine to reporters after the hearing, calling it the largest criminal pollution fine ever assessed and the most prosecutors could legally seek “for the faulty management of that particular unit.”

The criminal case is U.S. v. BP Products North America Inc., 07-cr-434, U.S. District Court for the Southern District of Texas (Houston). The civil cases are consolidated in Arenazas v. BP Products North America, 05CV0337, 212 District Court, Galveston County, Texas (Galveston).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at [email protected] ; Margaret Cronin Fisk in Southfield, Michigan, at [email protected] .

Last Updated: February 4, 2008 21:20 EST

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