By Daniel Gilbert 

NEW ORLEANS--A federal judge signaled Tuesday that he may allow BP PLC to pay pollution fines over time rather than in a lump sum, as the company and government lawyers sparred over billions of dollars in possible penalties for the Deepwater Horizon oil spill in 2010.

Judge Carl Barbier's interjection, during opening statements in a civil trial over Clean Water Act fines, raised the prospect that he could impose a significant penalty but lessen the immediate impact on BP by allowing it to pay in installments, legal observers said. The company is arguing for reduced fines, in part because it says it has been hurt by falling oil prices in recent months.

BP faces a maximum $13.7 billion penalty under the U.S. Clean Water Act for the largest offshore oil spill in U.S. history. The Justice Department is seeking a fine of at least $11.7 billion, emphasizing BP's wealth and the severity of the spill that fouled hundreds of miles of coastline.

Robert C. "Mike" Brock, a lawyer for BP, said in an opening statement that a fine of more than $2.3 billion would exhaust the available capital of the subsidiary charged with the violations, BP Exploration & Production Inc., and that the parent company isn't required to cover higher penalties. The value of the subsidiary's assets has shriveled by about a third, he added, largely because of the plunge in oil prices.

In an uncommon move, Judge Barbier stopped Mr. Brock as he described the BP subsidiary's financial condition.

"I hate to interrupt," the judge said. "Is there any reason that any penalties can't be structured to be paid over a number of years?"

The question appeared to catch Mr. Brock off guard. "I don't know," he said, adding that the parties hadn't discussed the matter.

Steve O'Rourke, a government lawyer, said he knew of one such precedent for a Clean Water Act penalty but didn't elaborate.

Daniel Jacobs, a professor at American University watching the proceedings, said Judge Barbier "might well be considering such a substantial penalty from the standpoint of financial impact on the company, payments would need to be structured over time." Mr. Jacobs, a former federal environmental prosecutor, said he expects the fine to be "record-setting."

Write to Daniel Gilbert at daniel.gilbert@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires