Spill Ruling Costs BP Billions

Tuesday, September 9, 2014 @ 04:09 PM gHale


BP Plc acted with gross negligence in setting off the biggest offshore oil spill in U.S. history in the Gulf of Mexico, a federal judge ruled.

That ruling may force BP to pay billions of dollars more for the 2010 Deepwater Horizon disaster, which left 11 workers dead.

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U.S. District Judge Carl Barbier held a trial without a jury over who was at fault for the catastrophe, which leaked oil in the Gulf for almost three months.

“BP has long maintained that it was merely negligent,” said David Uhlmann, former head of the Justice Department’s environmental crimes division. He said Barbier “soundly rejected” BP’s arguments others were equally responsible, holding “that its employees took risks that led to the largest environmental disaster in U.S. history.”

The case also included Transocean Ltd. and Halliburton Co., though the judge didn’t find them as responsible for the spill as BP. Barbier wrote in his decision in New Orleans federal court that BP was “reckless,” while Transocean and Halliburton were negligent. He apportioned fault at 67 percent for BP, 30 percent for Transocean and 3 percent for Halliburton.

UK-based BP is looking at possible fines of as much as $18 billion.

The ruling marks a turning point in the legal morass surrounding the causes and impact of the disaster. Four years of debate and legal testimony have centered on who was at fault and how much blame each company should carry.

BP Exploration & Production Inc. is “subject to enhanced penalties under the Clean Water Act” because the discharge of oil was the result of its gross negligence and willful misconduct, Barbier held. BP said it “strongly disagrees” with the decision and will challenge it before the U.S. Court of Appeals in New Orleans.

“BP believes that the finding that it was grossly negligent with respect to the accident and that its activities at the Macondo well amounted to willful misconduct is not supported by the evidence at trial,” the company said in a statement. “The law is clear that proving gross negligence is a very high bar that was not met in this case.”

The coalition of plaintiffs lined up against BP included the federal government, five Gulf of Mexico states, banks, restaurants, fishermen and a host of others who have pursued redress for their losses. While the judge’s ruling provides a partial answer, appeals may mean it will be years before final penalties end up tallied.

BP has set aside $3.5 billion to cover pollution fines. The company had taken a $43 billion charge to cover all the costs related to the spill, according to a July 29 earnings statement. The ultimate cost is “subject to significant uncertainty,” BP said.

The decision may expose BP to unspecified punitive damages for claimants who weren’t part of the $9.2 billion settlement it reached with most non-government plaintiffs in 2012.

The judge left that unclear in his ruling.

“Although BP’s conduct warrants the imposition of punitive damages under general maritime law, BP cannot be held liable for such damages under Fifth Circuit precedent,” he wrote, referring to the appellate jurisdiction that includes Louisiana.

In a footnote, however, Barbier said BP might be liable for punitive damages for other claims.

With only a ruling of negligence, Transocean escapes any such liability. Barbier had already determined Transocean ended up shielded from compensatory damages through the drilling contract. Halliburton, which also won an earlier indemnity ruling, removed the threat of punitive damages by agreeing to a $1.1 billion settlement with most plaintiffs Sept. 2.

Equipment failures and questions about lapses in oversight led to an overhaul of federal regulations governing offshore safety in the following years. The agencies overseeing deep-water drilling ended up reorganized, with new rules put in place to strengthen requirements for equipment, inspections and accident response.

The disaster sparked thousands of lawsuits against BP; Vernier, Switzerland-based Transocean, the owner of the drilling rig; and Houston-based Halliburton, which provided cement for the well.



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