Judge: BP contract shields Transocean from oil spill damages
Published: January 29,2012
Tags: claims, courts, damasges, disaster, disaster recovery, energy, environment, explosion, gas, habitat, law, lawsuit, offshore drilling, Oil, oil rig, oil spill, petroleum, seafood, tourism, tourists, visitors, wildlife
GULF OF MEXICO — The rig owner involved in drilling the ill-fated well that blew out in the Gulf of Mexico and spewed more than 200 million gallons of oil will not have to pay many of the pollution claims because it was shielded in a contract with well-owner BP, a federal judge ruled. The ruling came as BP, the states affected by the disaster and the federal government are discussing a settlement over the nation’s largest offshore oil spill.
The decision may have spared Transocean from having to pay potentially billions of dollars in damage claims. However, U.S. District Judge Carl Barbier said the driller still is not exempt from paying punitive damages and civil penalties that arise from the April 20, 2010, blowout 100 miles off the Louisiana coast. Those penalties could amount to billions of dollars.
Law experts were split over who is a clear-cut winner.
BP has been pursuing agreements with multiple parties to reach settlements that would make an upcoming trial involving hundreds of spill lawsuits in New Orleans unnecessary, or at least resolve as many of the issues as possible.
The Justice Department also is involved, working with the states to create an outline for a settlement that would resolve their potentially multibillion dollar claims against BP and the other companies involved in the disaster, Alabama Attorney General Luther Strange told The Associated Press.
Justice led a meeting last week in Washington among the states in an effort to formulate an agreement that would satisfy government and state claims, including penalties and fines, Strange said. He also indicated if there is a settlement that officials are discussing what to do with the $20 billion fund set up by BP to pay victims.
The lead attorneys for individuals and businesses suing BP were not at the meeting.
According to Strange, a federal magistrate judge has been asked to expedite settlement discussions. The Louisiana attorney general’s office said in a statement to the AP that it is in settlement discussions with BP, which would not comment on any deals in the works. A first phase of the trial is set for Feb. 27 to determine liability for the spill.
“The closer you get to a trial date, the more pressure builds to reach a settlement,” Strange said.
Despite the decision, BP claimed victory and said Barbier’s ruling “at a minimum” left Transocean facing “punitive damages, fines and penalties flowing from its own conduct.”
Transocean spokesman Lou Colasuonno said in an emailed statement that the company was pleased to see its position affirmed.
“This confirms that BP is responsible for all economic damages caused by the oil that leaked from its Macondo well, and discredits BP’s ongoing attempts to evade both its contractual and financial obligations,” he said.
Blaine LeCesne, an associate professor at Loyola University law school, however, said Barbier’s ruling was a “major victory” for Transocean.
“If anything is going to compel the parties toward settlement, it’s going to be this,” he said. “I think BP is in a very bad position now, and they don’t have a lot of leverage.”
A University of Michigan Law School professor who served as chief of the Justice Department’s environmental crimes section said the ruling had no clear-cut winner. David Uhlmann said it prevents BP from collecting billions of dollars from Transocean to help cover cleanup costs and pay for claims over economic losses and environmental damage from the spill. But the decision leaves Transocean facing potentially billions of dollars in civil and criminal penalties under the Clean Water Act, he added.
“It’s a partial win for each side and a partial loss for each side,” Uhlmann said.
BP PLC, Transocean Ltd. and Halliburton Co. have been sparring over who was at fault for causing the blowout. The out-of-control well was capped in July, 2010. Federal investigators have said that BP bears ultimate responsibility for the spill, but has faulted all three companies to some degree.
Under a drilling contract, BP and Transocean agreed to indemnify each other in the case of an accident, with BP taking responsibility for pollution originating from the well and Transocean for any pollution or accidents aboard the rig.
However, in court BP argued that the contract did not shield Transocean if the drilling company acted in manner that was grossly negligent.
Barbier said the contract was a “clear and unequivocal agreement” to provide “broad indemnity.”
“As we have said from the beginning, Transocean cannot avoid its responsibility for this accident,” BP said.
The British oil giant said it had “stepped up” and admitted its role in the spill and paid billions of dollars in claims.
BP also is eager to resolve its disputes with its partners on the doomed rig. The companies have sued and countersued each other for billions of dollars to protect themselves when it comes to paying damages to victims and penalties to the government.
Months ago, BP offered to resolve its dispute with Transocean if Transocean paid BP roughly $4.5 billion, according to a person briefed on the discussions who spoke to the AP on condition of anonymity because the talks are confidential. Transocean rejected the offer, and there have been no substantive discussions between the companies about figures since then, the person said, adding that the ruling could spur further talks.
Eric Schaeffer, who led the Environmental Protection Agency’s civil enforcement office from 1997 to 2002, said the ruling would put even more pressure on BP.
“If BP is less able to shift some of those costs to Transocean, if they understand they are going to bear Transocean’s share of compensatory damages, I’d want to get it settled,” Schaeffer said. “That’s no longer a wild card.”
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