BP’s ‘recklessness’ lead to Macondo incident, Court says

The United States District Court for the Easter District of Louisiana yesterday ruled that the discharge of oil in the Deepwater Horizon case in 2010, was the result of BP’s “gross negligence” and “willful misconduct”.

As for the amount BP needs to pay for the spill, the court says that in the absence of gross negligence or willful misconduct (i.e., if the defendant acted with ordinary negligence or was not negligent), the maximum amount of the CWA civil penalty is $1,100 per barrel of oil discharged.

However, the maximum amount per barrel is nearly quadrupled when the discharge results from gross negligence or willful misconduct.

Court concluded that BP committed a series of negligent acts or omissions that resulted in the discharge of oil, which together amount to  gross negligence and willful misconduct under the CWA.

The court further found that BP’s conduct was reckless. Transocean’s conduct  was negligent. Halliburton’s conduct was also negligent. The Court further concluded that the comparative fault of the Defendants,  expressed as a percentage of total liability, is as follows:  BP: 67%, Transocean: 30%, Halliburton: 3%.

$18 billion

According to Reuters, BP is facing an $18 billion penalty.

In a statement issued in response to the ruling BP said it strongly disagrees with the decision issued today by the United States District Court for the Eastern District of Louisiana and “will immediately appeal to the United States Court of Appeals for the Fifth Circuit.”

“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 law s clear that proving gross negligence is a very high bar that was not met in this case. BP believes that an impartial view of the record does not support the erroneous conclusion reached by the District Court,” the company said.

“The Court has not yet ruled on the number of barrels spilled and no penalty has yet been determined. The District Court will hold additional proceedings, which are currently scheduled to begin in January 2015, to consider the application of statutory penalty factors in assessing a per-barrel Clean Water Act penalty. The Clean Water Act requires the District Court to consider a number of factors in determining an appropriate penalty. The statutory maximum penalty is $1,100 per barrel where the court finds simple negligence and $4,300 per barrel where the court finds gross negligence or willful misconduct. During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors,” BP added.

Favorable ruling for Transocean

Transocean Ltd., the owner of the Deepwater Horizon rig destroyed in the 2010 blow-out welcomed the ruling. The Court found that BP’s contractual agreement to indemnify Transocean for compensatory damages is valid and enforceable. Also, the Court’s finding that Transocean was not grossly negligent means that the company is not liable for punitive damages.

“This is a favorable and welcome ruling for Transocean, its employees, and all offshore drilling contractors, as the Court has again ratified the industry-standard allocation of liability between drilling contractors and the owners and operators of oil wells,” said Steven Newman, President and Chief Executive Officer. “As we remember the 11 men who died in this tragic accident, we appreciate the Court’s observation that the Deepwater Horizon crew was attentive and serious and acted bravely in the face of chaotic circumstances, committing multiple heroic acts that saved many lives on April 20, 2010.”

Hallburton pleased

The court ruled that Halliburton was negligent in its conduct related to the April 20, 2010 Macondo well incident in the Gulf of Mexico. The Court allocated 3 percent of the fault to Halliburton with the remaining fault allocated to other parties involved. Further, the Court did not find that Halliburton’s conduct constituted gross negligence.

“Halliburton is pleased with today’s ruling, which, coupled with our earlier announced settlement with the plaintiffs’ class, means the Macondo case is essentially over for Halliburton,” the company said.

The Court also held that, pursuant to the parties’ contract, BP must indemnify and release Halliburton with respect to compensatory damages claims. In addition, the lack of a gross negligence finding against Halliburton should resolve all remaining punitive damages claims against the company.

“Halliburton is continuing to evaluate the various aspects of the rulings and will act appropriately to defend its interests in any further proceedings,” Halliburton added.

Halliburton previously announced that it has reached an agreement to settle punitive damages claims against Halliburton by a class of plaintiffs who allege damages to property or associated with the commercial fishing industry arising from the Deepwater Horizon incident, and claims against Halliburton that BP assigned to the settlement class in BP’s April 2012 settlement.

The approximately $1.1 billion settlement, which includes legal fees, is subject to approval by the United States District Court for the Eastern District of Louisiana, and will be paid into a trust until all appeals have been resolved in three installments over the next two years. The company’s previously accrued loss contingency provision relating to the multi-district litigation proceedings is currently $1.3 billion.

Offshore drilling a bad idea?

In response to the ruling Sierra Club Director of Lands Protection, Athan Manuel, issued the following statement: “This ruling is confirmation of what has long been clear– oil companies cannot be trusted to drill off our coasts. Time and again industry promises of safety and responsibility have been belied by ruined coastlines, damaged coastal economies, and injured wildlife. The fact is that drilling means spilling.

“Today’s decision is a reminder that expanding oil and gas drilling off our coasts is a bad idea. Opening new areas off the Atlantic, Pacific and Arctic coasts not only risks local communities and environments, but also our climate. President Obama’s work fighting climate disruption should extend to include protecting our coasts and beaches from drilling. As the Administration develops its next offshore leasing plan, it must consider keeping these dirty fuels in the ground, or risk the significant climate progress already made.”

Deepwater Horizon

The blowout preventer (BOP) that was intended to shut off the flow of high-pressure oil and gas from the Macondo well in the Gulf of Mexico during the disaster on the Deepwater Horizon drilling rig on April 20, 2010, failed to seal the well because drill pipe buckled for reasons the offshore drilling industry remains largely unaware of, according to a new two-volume draft investigation report released recently by the U.S. Chemical Safety Board (CSB).

The blowout caused explosions and a fire on the Deepwater Horizon rig, leading to the deaths of 11 personnel onboard and serious injuries to 17 others. Nearly 100 others escaped from the burning rig, which sank two days later, leaving the Macondo well spewing oil and gas into Gulf waters for a total of 87 days. By that time the resulting oil spill was the largest in offshore history. The failure of the BOP directly led to the oil spill and contributed to the severity of the incident on the rig.