NEW YORK — As the gulf oil spill gushed out of control, BP's financial liabilities seemed big enough to sink the company. No more.
Cleanup, government fines, lawsuits, legal fees and damage claims will likely exceed the $40 billion that BP has publicly estimated. But they'll be far below the highest estimates made over the summer by legal experts and Goldman Sachs, which said costs could near $200 billion.
BP will survive the worst oil spill in U.S. history for several key reasons: it has little debt; its global businesses are forecast to generate $26 billion next year in cash flow from operations; the environmental impact of the spill isn't as bad as feared; and the government seems unlikely to ban BP from gulf drilling.
"It could have been a lot worse," says Tyler Priest, a University of Houston petroleum historian who serves on President Obama's oil spill investigation committee.
The AP analysis shows the company is likely to face $38 billion to $60 billion in spill-related costs. A settlement with the federal government could reduce that amount, while a successful class-action lawsuit could add billions more.
The analysis includes:
• The $10.7 billion that BP already has paid to plug its well, clean up the spilled oil and pay damage claims and other costs.
• A $20 billion fund that BP set up in August for individuals and private businesses that were affected by the spill. The fund so far has paid $2.7 billion to address nearly 168,000 claims.
• Fines: The Justice Department is suing BP for violating the Clean Water Act. Fines are based on how much oil was spilled. The government's estimate of 4.9 million barrels means BP faces between $5.4 billion and $21.1 billion in fines. The government has a history of settling with companies for as little as 50 cents on the dollar.
• Legal fees: BP has hired lawyers, engineers and geologists to defend the company, at a potential cost of $2 billion.
• Lawsuits: The toughest costs to estimate are future settlements and judgments from the hundreds of lawsuits filed against BP, including any class actions. And gulf states and local governments are expected to sue for lost tax revenue and environmental damages. Alabama is seeking an initial $148 million from BP. Analysts at Citigroup say settlements, judgments and punitive damages from these suits will total as much as $6 billion.
A successful class-action could easily double estimate for total legal liabilities.