The United States District Court for the Eastern District of Louisiana found BP was grossly negligent with regard to the accident and its activities in conjunction with the Macondo well in the Gulf of Mexico. BP said it “strongly disagrees” with the finding and will immediately appeal. The number of barrels spilled remains in question and will ultimately factor into the dollar amount of the penalty, which could stretch well beyond $10 billion.

“The Court has not yet ruled on the number of barrels spilled and no penalty has yet been determined. The District Court will hold additional proceedings, which are currently scheduled to begin in January 2015, to consider the application of statutory penalty factors in assessing a per-barrel Clean Water Act penalty. The Clean Water Act requires the District Court to consider a number of factors in determining an appropriate penalty. The statutory maximum penalty is $1,100 per barrel where the court finds simple negligence and $4,300 per barrel where the court finds gross negligence or willful misconduct. During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors.” – BP

So the legal proceedings turn back to the question of how many barrels were released from the blown out Macondo well. The figure $18 billion has been floating around the media, but it could be more or less depending on several factors.

Assuming BP’s appeal effort fails and the gross negligence determination is upheld, it appears the company will be penalized at a rate of $4,300 per barrel. A trial last fall featured competing estimates of the total volume released ranging from 5 million barrels at the high end to 3.26 million barrels at the low end, which is the figure BP defends.

As such, the maximum penalty could be as high as $21.5 billion, which is roughly 15% of the company’s market capitalization. The 3.26 mmbbl figure would result in a penalty of about $14 billion, which is still much higher than the $3.5 billion BP reportedly has “set aside” to settle the impending damages.