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Sunday, July 11, 2010
Law - Bankruptcy and BP
The NY Times reporter John Schwartz reported in a long story yesterday:
With pockets as deep as BP’s — its assets are worth more than $260 billion — the possibility that it might be forced to seek bankruptcy protection because of the Gulf of Mexico oil spill is considered remote by many industry experts.The NY Times has also prepared interactive maps tracking the oil spill in the Gulf, and a devastating map showing combined oil slick areas May 8 to July 8, which allows you to see, day by day, the way the oil has spread during that period.But what if the company’s plan to contain the spill in the next several days does not work, and other efforts to stop the gushing oil also fail? If that were to occur, the worst-case projections of some experts, if they came to pass, would strain the ability of any company to pay, said Robin K. Craig, associate dean for environmental programs at the Florida State University College of Law.
Professor Craig said that if the oil hit the Gulf Stream and was carried by currents to East Coast states, Cuba and other Caribbean nations, and possibly even Britain, lawsuits could quickly mount to levels even BP could not handle.
“My bet is that BP will finally go bankrupt from the tort liability and the environmental liability,” she said. “Hypothetically, a bluefin tuna farmer in the Mediterranean could end up with a claim against BP.”
Even those who find it unlikely that BP will seek bankruptcy protection believe it is likely that the company has to at least consider it as a possibility, in light of spiraling environmental costs, economic claims and the unpredictability of American juries.
“They’ve got a duty to their shareholders and others to consider every possibility,” said Samuel J. Gerdano, the executive director of the American Bankruptcy Institute. “It’s not a matter of panic, it’s not a matter of irrationality. It’s a coldhearted and clearheaded consideration of options.”
A BP spokesman, Max McGahan, declined to comment on “hypothetical” questions. The company has said from the start that it has the resources to meet the economic challenge, including strong cash flow and billions of barrels of oil in proven reserves.
A previously unreleased memorandum by the Congressional Research Service outlined ways that a bankruptcy filing by BP could disrupt the cleanup and compensation.The letter, prepared in response to questions from Senator Thomas R. Carper, Democrat of Delaware, stated that economic and environmental claims would fall into line behind the company’s secured creditors as “nonpriority, unsecured claims,” leaving much of the continuing cost of cleanup, in all likelihood, to the federal government. With a judge’s approval, the company’s assets could even be sold and its liabilities left behind.
Posted by Marcia Oddi on July 11, 2010 10:18 AM
Posted to Environment | General Law Related