Q+A: How would penalties apply to the Gulf oil spillQ: WHO COULD BE SUBJECT TO PENALTIES?
A: The U.S. Justice Department has launched both a criminal and civil investigation into the oil spill but officials have not identified the targets. However, the likely companies that will be the focus of the investigation include BP, Transocean Ltd, which operated the drill rig, Cameron International, which provided the blowout preventer, and Halliburton Co, which was in charge of the cement for the oil well.
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Q: WHAT ARE THE POSSIBLE TOTAL FINES?
The White House has already estimated that the costs for the response, cleanup and penalties will reach into the billions of dollars. Before the new flow rate of up to 40,000 barrels (1.68 million gallons/6.36 million liters) per day was revealed, some financial analysts estimated that the Clean Water Act fines could stretch from $700 million to as much as $4.2 billion.
With the new estimates, as much as 2 million barrels (84 million gallons/318 million liters) of oil may have spilled from the well when it ruptured on April 20 through June 3 when the underwater pipe was sawed off to clear the way for a new cap to be placed on it. The flow was estimated to have increased as much as 5 percent after that cut.
Just based on that initial 2 million barrels of oil, the range of civil penalties could be between $2.2 billion and $8.6 billion. Penalties could be applied to each company found responsible for the leak, though one expert said that they would likely share the burden instead and that there would probably be a limit to those penalties imposed.
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Q: CAN THE COMPANIES AFFORD IT?
A: Questions have been raised whether the companies can afford the cost of the cleanup, recovery and penalties, however most experts consider the chances of default to be small. Here is a snapshot of how much the companies earned last year in net income and how much cash they had on hand at the end of 2009.
BP posted about $16.8 billion in net income last year and had $8.3 billion in cash and cash equivalents at the end of the year.
Cameron earned $475.5 million in net income in 2009 and had about $1.86 billion in cash and cash equivalents at the end of last year.
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Edited to clarify: BP paid an executive more than $475 million, and the current liability is capped at $75 million.
Also clarified title.