BP Gulf Spill Trial Begins With Billions of Dollars at Stake

Monday, 25 Feb 2013 10:35 AM

 

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BP Plc, Transocean Ltd. and Halliburton Co. are seeking to avoid billions of dollars in damages by proving in court that mistakes leading to the 2010 Gulf of Mexico oil spill didn’t amount to gross negligence.

Opening statements began this morning in New Orleans before U.S. District Judge Carl Barbier, who will weigh the evidence without a jury, to determine fault and whether one or more of the companies acted with willful or wanton misconduct or reckless indifference — the legal requirement for establishing gross negligence.

The blowout and explosion aboard the Deepwater Horizon drilling rig killed 11 workers and spilled more than 4 million barrels of oil into the Gulf. The accident sparked hundreds of lawsuits against London-based BP, Vernier, Switzerland-based Transocean, owner of the rig, and Houston-based Halliburton, which provided cement for the well.

One reason for the disaster was the “willful failure of Transocean to give its Deepwater Horizon crew adequate training” on how to interpret safety tests on the well, Jim Roy, a lawyer for oil-spill victims, told Barbier in his opening statement. “The gross and extreme departure from good oil-field practice rests with the management of Transocean,” Roy said.

Punitive Damages

For BP, owner of the Macondo well that blew up in the Gulf, a finding of gross negligence would mean the company is liable to the U.S. for as much as $17.6 billion in Clean Water Act fines, as well as unspecified punitive damages to claimants who weren’t part of the $8.5 billion settlement the company reached last year. For Transocean and Halliburton, a finding of gross negligence would mean the companies can be held liable for punitive damages for all plaintiffs.

BP, over-budget and behind schedule for the Macondo well, cut corners and ignored tests showing unsafe pressure levels as it tried to complete the project, according to the plaintiffs. They also claim that Halliburton’s cement job was defective and that Transocean disabled safety systems and failed to maintain the rig and adequately train its crew.

BP lodged complaints against its contractors, with its own claims that Transocean failed to maintain the drilling rig and Halliburton provided defective cementing services and concealed problems with the cement before and after the explosion.

Transocean and Halliburton pointed fingers back at BP.

Maritime Law

Barbier will apply maritime law, which governs this phase of the litigation. A trial on efforts to contain the spill is set for September. One or more trials on damages will follow, barring any out-of-court settlements.

The judge will apportion fault for the explosion and spill among BP and its subcontractors. Halliburton and Transocean would only be responsible for punitive damages, based on Barbier’s ruling last year that the project contract required BP to indemnify them for compensatory damages.

BP is responsible for any compensatory damages awarded to plaintiffs who haven’t previously settled. Those plaintiffs, including businesses such as banks and casinos and those harmed by the deep-water drilling moratorium imposed by the U.S. after the spill, are also seeking punitive damages. BP has said it will fight these claims.

The trial, initially set to begin last March, was rescheduled after BP reached a settlement with most individual and other so-called private-party plaintiffs.

Uncapped Settlement

That settlement, which isn’t capped, is estimated at $8.5 billion by BP and excludes claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses alleging harm from the deep-water drilling moratorium.

It also didn’t cover federal government claims and those of Gulf Coast states Louisiana and Alabama, or lawsuits against co-defendants. Lawyers for the U.S. and the two states will be presenting evidence at the trial, along with attorneys for the private parties. BP has said the states are claiming at least $34 billion in damages.

Alabama Attorney General Luther Strange and his counterpart in Louisiana, Buddy Caldwell, were both in court today as the trial began.

The U.S. government sued BP and Transocean in 2010 for violations of the Clean Water Act and the Oil Pollution Act, seeking fines, cleanup costs and natural-resources damages.

The U.S. estimated that 4.9 million barrels gushed from the doomed Macondo well. BP and the government agreed last week that 810,000 barrels of oil that the company captured before they entered Gulf waters wouldn’t be included in Clean Water Act fine calculations. The agreement cut BP’s highest potential government fine by $3.4 billion.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

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