What percent of this maximum was the final settlement

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Reference no: EM131618050

Math Analysis BP Oil

For 87 days in the spring and summer of 2010, British Petroleum's Deepwater Horizon spilled millions of gallons of crude oil into the Gulf of Mexico, resulting in one of the largest oil spills in the history of the United States and one of the largest unintentional oil spills in history.

In addition to the cost of cleaning up the spill and compensation to those affected, BP was also responsible for penalties under the Clean Water Act, which calls for fines of $1,100 per barrel, for simple negligence, up to $3,000 per barrel, for gross negligence. The federal prosecutors argued that the fines should go as high as $4,300 under the Environmental Protection Agency rules.

An important part of determining the appropriate fine was estimating the size of the spill. Experts offered differing opinions on the flow rate of the oil from the undersea well. Initially, an expert from BP insisted that the oil was flowing at a rate of only 5,000 barrels per day. It turned out that this was a gross underestimate of the flow rate, and the BP expert was eventually prosecuted for misleading the investigation. An expert in fluid dynamics studied the flow rate on video and computed a rate of approximately 70,000 barrels per day (+/- 20%).

During the third phase of the trial, a judge was left to weigh the differing opinions and decide on a penalty for BP. A final settlement amount of $18.7 billion was eventually agreed upon. The trial took two years and was one of the most complicated civil cases in the history of the U.S. courts.

Use this information to answer the following questions:

1. Use the fluid dynamics expert's range on the number of barrels per day calculate a minimum and maximum flow rate per day.

2. Use the range of the number of barrels per day along with the allowed penalty range under the Clean Water Act and EPA guidelines to calculate a minimum and maximum penalty for BP. What percent of this maximum was the final settlement?

3. Do you think the penalty imposed by the judge in the third phase of the trial was fair? Explain your response.

For questions 1 and 2 show your calculations. Your answer to question 3 should be at least one paragraph, 4-5 sentences.

Reference no: EM131618050

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