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America exaggerated facts on oil spill, BP tells court

Suppressed documents could show that the Gulf of Mexico spill was not as bad as feared, oil giant says

BP has dramatically escalated its row with the United States government over the Gulf of Mexico oil spill by accusing Washington of withholding evidence which would show that the true extent of the disaster was not as bad as claimed.

The British oil giant alleged in court that US authorities are using legal "privilege" to "shield documents reflecting discussions and deliberations concerning a factual issue, the amount of oil discharged".

BP claimed it has identified 10,000 documents, out of more than 80,000, that the US has sought to suppress.

A key issue in the dispute remains just how much oil leaked from the faulty Macondo well after the explosion on board the Deepwater Horizon rig in April 2010. Washington estimated in August 2010 that 4.9 million barrels of oil spilled into the Gulf, according to Bloomberg. But BP pointed out that the US made at least four official estimates of differing amounts.

BP could face as much as $17.6bn (£11bn) in pollution fines under the US Clean Water Act, based on the government's estimate of barrels spilled. If the oil giant is found guilty of simple negligence, it would have to pay a fine of up to $1,100 for each barrel of oil. But the maximum fine could increase to $4,300 a barrel if BP or other defendants are found to have been grossly negligent because of a failure to take action which would have prevented the disaster.

The oil giant said that since the US has brought the case, it is is "fundamentally unfair" for it to refuse to disclose documents. A spokesman declined to elaborate further.

Jason Gammel, an analyst at Macquarie Securities in London, said: "The volume of oil that did actually the enter the Gulf of Mexico is very much an estimate and it is something thatcould be disputable within a prettywide range."

Eric Holder, US Attorney General, said last month that the government believes it has a "strong" case against BP for liability.

BP has already said it will pay out $7bn in damages to victims, including fishing fleets and local businesses along the US Gulf coast, but has set aside as much as $37bn to cover all costs.

The decision to challenge the US government is a potential risk for BP, which has already faced intense criticism from lawmakers in Congress.

The Deepwater Horizon explosion, which killed 11 workers, and subsequent spill caused huge reputational damage to BP. The London-listed company's stock market value crashed by more than half as it took three months to stop the oil from leaking. Tony Hayward, the chief executive, was pilloried for saying "I'd like my life back" midway through the clean-up operation and quit soon afterwards.

BP shares, which slumped from above 600p to almost 300p during 2010, continue to suffer a roller-coaster ride. The stock recovered most of its losses to hit a post-Gulf of Mexico high of 554p on 12 March, but it has slipped back in recent weeks as some analysts fret about the legal action. BP closed last night at 462.55p, up 3.65p on the day.

Pension funds are heavily invested in BP which has traditionally paid the biggest dividend of any FTSE 100 company. BP suspended the dividend in the immediate aftermath of the spill as it set aside funds to pay for damages.