New York Pension Is Mulling a Lawsuit Against BP

(June 18, 2010) — The $132.6 billion New York State Common Retirement Fund is considering suing BP for its management of the well in the massive Gulf of Mexico oil spill.

The fund, one of the largest pensions in the country, owns 17.5 million BP shares through index funds. The potential suit reflects heightened pressure against the beleaguered British oil giant since the April 20 explosion aboard a rig that killed 11 workers, spewing out thousands of barrels of oil a day.

Since the explosion at its Macondo oil well, BP’s stock on both sides of the Atlantic, largely held by pension funds, has dropped by nearly half.

Already, BP has spent about $1.8 billion in the spill response, with the cleanup tab expected to hit $20 billion, assuming worst-case spill estimates. The firm faces billions more in costs related to plugging the leak, clean-up, fines and potential litigation — if found “negligent” under federal law, BP’s fines could quadruple to $4,300 per barrel spilled, adding perhaps $20 billion to the bill, the AP reported.

On Wednesday, President Obama sat down with BP officials and agreed to a $20 billion fund for claims that would be funded by BP, but run by the government. The intense political pressure from the US led BP to suspend its quarterly dividend payments.

“BP’s package agreed with President Obama should cool the political heat and provide some degree of comfort to equity and bond markets, shareholders and businesses/residents in (the Gulf of Mexico) affected by the Deepwater Horizon accident,” analysts at Evolution Securities said in a research note Thursday.

Nationwide, other pensions have faced similar hits over the BP disaster. This week, the Florida’s pension fund, the fourth-largest in the nation, noted the value of its BP investments had plunged more than $67 million since the April 20 explosion. On the other hand, New Jersey’s pension system avoided the hit from BP’s stock drop as state portfolio managers made a fortuitous decision to sell off most of the state’s $465 million position in BP shares in January, months before the explosion.