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BP Moving Toward Aggressive Stance on Liabilities

As BP transitions to a new CEO, the company is also subtly transitioning to a new, more aggressive strategy when it comes to its liabilities for the Gulf oil spill.

An oil-stained Sandwich Tern sits on oil absorbent boom in Long Bay on June 19, 2010 west of Port Sulpher, Louisiana. The bird was reported and delivered to the Louisiana Department of Wildlife and Fisheries for rehabilitation.
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An oil-stained Sandwich Tern sits on oil absorbent boom in Long Bay on June 19, 2010 west of Port Sulpher, Louisiana. The bird was reported and delivered to the Louisiana Department of Wildlife and Fisheries for rehabilitation.

On Tuesday, BP announced that it was setting aside $32.2 billion to cover the costs of the spill—including paying legal claims.

And while the company noted in its earnings report that its potential liabilities "cannot be fully estimated at this time," incoming CEO Robert Dudley suggested to CNBC Tuesday that the worst of the costs are already known.

"We've seen nothing that indicates we're grossly negligent in any way," Dudley said. "If we thought we were, we would have put bigger numbers in terms of the liabilities."

The statement could be a signal that BP has begun to dig in its heels on the legal front, according to the special advisor to Florida Governor Charlie Crist on oil spill issues, who says Dudley's language about negligence is telling.

"Talk about finding some intentional wrongdoing or some grossly negligent conduct, and then BP will not be able to put a handle on their projected or foreseeable liabilities," said attorney Steve Yerrid on CNBC.

"It will be Katy bar the door, and the door will be blown open."

So how can BP be so certain the bulk of its costs are covered? The company has been working to contain its liabilities almost since it began working to contain the oil.

For example, the $20 billion escrow fundBP agreed to establish actually helps the company, giving it a finite number—albeit a large one—for planning. The escrow fund is included in the $32.2 billion charge, according to the company.

And for liabilities not covered by the fund—including government sanctions and legal claims by plaintiffs who opt out of the fund, BP is taking additional steps to protect itself. They include hiring scientists and other researchers to assist in its legal defense and requiring them to sign strict nondisclosure agreements.

"University of California-Berkeley engineering professor Robert Bea, who previously worked as a consultant to BP, says the company is attempting to 'buy' scientists."

The effort, first reported by the (Mobile) Alabama Press-Register, has netted "more than a dozen" scientists, according to BP spokesman Steve Rinehart, who confirms that BP is asking the scientists to treat information they get from company attorneys as confidential.

BP's proposed "retention agreement," a copy of which was obtained by CNBC, would bar researchers from publishing spill-related research for three years or at the completion of BP's government-mandated restoration plan, whichever comes first.

The effort has drawn criticism in academic circles.

University of California-Berkeley engineering professor Robert Bea, who previously worked as a consultant to BP, says the company is attempting to "buy" scientists.

Contract workers from BP load absorbent booms onto a boat before departing from a staging area to clean up oil impacted marshes  June 1, 2010 near Venice, Louisiana. Earlier in the day, U.S. President Barack Obama called the Deepwater Horizon accident the "greatest environmental disaster of its kind in our history."
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Contract workers from BP load absorbent booms onto a boat before departing from a staging area to clean up oil impacted marshes  June 1, 2010 near Venice, Louisiana. Earlier in the day, U.S. President Barack Obama called the Deepwater Horizon accident the "greatest environmental disaster of its kind in our history."

"Unwittingly or wittingly, we have eliminated a large population of experts," Bea told CNBC.

BP denies trying to muzzle scientists. BP's Rinehart said that the nondisclosure agreement only applies to work they do in connection with the legal case.

"We are not on a campaign to suppress inquiry or discussion," Rinehart said, noting that BP announced in May a major scientific research initiative—including $500 million in grants—to study the spill. But that effort has raised concerns that grant recipients could face similar restrictions on disclosure. Rinehart says the process for awarding the grants is still under discussion.

Even if it can get top scientists in its camp, and even with a fully financed escrow fund, BP faces an almost unprecedented legal and regulatory onslaught. In the regulatory filing accompanying its earnings release Tuesday, BP detailed a litany of investigations from agencies ranging from the EPA to state attorneys general in Louisiana, Texas, Mississippi, Alabama and Florida.

The company also disclosed for the first time that the Securities and Exchange Commission has joined the Department of Justice in "informal enquiries into securities matters arising in relation to the incident." Neither the SEC nor the DOJ would confirm the probe, and BP would not provide details on what securities issues are involved.

On June 1, US Attorney General Eric Holder unveiled a broad investigation into possible criminal or civil violations in connection with the spill. Holder said prosecutors were looking at a wide variety of statutes including the Clean Water Act, the Endangered Species Act and the Oil Pollution Act. At the time, he did not raise the potential of any financial fraud in connection with the spill.