HOUSTON – A federal judge on Thursday ruled that BP’s oil spill in the Gulf of Mexico four years ago was the result of gross negligence or willful misconduct by the London oil company.
The decision could cost BP billions of dollars more in fines for fouling the ocean, though it could be years before legal battles over the spill are resolved, as BP plans to appeal. Investors erased as much as $9.4 billion from BP’s market value Thursday.
The 153-page ruling comes more than four years after a subsea well blowout triggered an explosion at BP’s leased Deepwater Horizon platform on April 20, 2010, killing 11 workers and sending millions of barrels of oil into the ocean, along with the drilling platform that sank a few days later.
It was the biggest oil spill in U.S. history, lasting 87 days and spreading across hundreds of miles of beach in Louisiana, Texas and surrounding states. It spurred thousands of lawsuits and billions in fines and cleanup costs for BP, Transocean and Halliburton.
U.S. District Judge Carl Barbier of New Orleans said in his ruling BP committed a series of negligent acts and omissions that resulted in the discharge of oil, including drilling a final 100 feet in the Macondo well “with little or no margin.”
A ruling of gross negligence is one of the key factors that could lead to the maximum penalty of Clean Water Act fines for BP, $18 billion, if Barbier later sides with U.S. prosecutors that 4.9 million barrels of oil spilled into the Gulf. Barbier has yet to rule on the amount of oil spilled, but could hand down a judgement at any time. BP made $23.5 billion in profit last year.
Barbier’s decision to slap BP with gross negligence, rather than simple negligence, means fines could rise to $4,300 per barrel, rather than the minimum $1,100 per barrel.
In a statement, U.S. Attorney General Eric Holder said the Department of Justice is pleased with the ruling.
“The court’s findings will ensure that the company is held fully accountable for its recklessness,” Holder said. “We are confident this decision will serve as a strong deterrent to anyone tempted to sacrifice safety and the environment in the pursuit of profit.”
Barbier, who was appointed by former President Bill Clinton, also said BP is “subject to enhanced civil penalties” under the Clean Water Act. He ruled that BP’s conduct was reckless while Transocean and Houston oil field service firm Halliburton, which provided cement for the Macondo well, were negligent.
In apportioning fault, Barbier said BP was 67 percent responsible for the spill, while the owner of the Deepwater Horizon, Transocean, is 30 percent responsible and Halliburton would take 3 percent of the fault.
A BP spokesman said the company “strongly disagrees” with the decision and plans to file an appeal immediately. The firm has set aside more than $42 billion to cover oil spill costs and has paid some $27 billion in fines and compensation already.
“BP believes the finding that it was grossly negligent” was not “supported by the evidence at trial,” a spokesman said in an emailed statement. “The law is 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.”
The ruling comes two days after Halliburton settled with Gulf residents and businesses for $1.1 billion, a move that allowed it to sidestep liability it may have faced if Barbier ruled it was negligent. Halliburton had provided cement for the doomed Macondo well, which federal investigators later concluded was unstable.
In an emailed statement, Halliburton said it was “pleased” with Barbier’s decision that it wasn’t grossly negligent, which means “the Macondo case is essentially over for Halliburton.”
“The lack of a gross negligence finding against Halliburton should resolve all remaining punitive damages claims against the company,” Halliburton said.
A spokesman for Transocean said it’s “a favorable and welcome ruling for Transocean, its employees, and all offshore drilling contractors.”
“The court has again ratified the industry-standard allocation of liability between drilling contractors and the owners and operators of oil wells,” Transocean said.
BP had been in the process of temporarily abandoning the deep-water Macondo well in the Gulf when a subsurface reservoir kick of pressure forced fluids into the wellbore, eventually causing a blowout. The following explosion on the Deepwater Horizon should have triggered the platform’s blowout preventer on the ocean floor just above the well, but it didn’t, and the emergency device failed to plug up the gushing oil well.
The Deepwater Horizon rig, which went into service in 2001, had drilled about 50 wells in its lifespan in the Gulf. It sank to the bottom of the ocean days after the crude gusher began to flow.
Barbier ruled that BP was also negligent by pumping cement into the Macondo well without a successful stability test. He said that although the instability of the cement provided by Halliburton didn’t cause the oil spill, “it is another instance of BP proceeding in the face of a known risk and therefore lends further support to the conclusion that BP’s conduct was reckless.”
Barbier is scheduled to hold a final phase in the civil trial in January, to hear testimony on potential Clean Water Act penalties. BP said during the penalty phase it will attempt to show “its conduct merits a penalty that is less” than the maximum.
“The court has now laid bare the full extent of the level of BP’s misconduct,” said James Roy and Stephen Herman, lead attorneys for thousands of oil spill claimants. “We hope that today’s judgement will bring some measure of closure to the families of the eleven men who tragically lost their lives, and to the thousands of people and businesses still trying to recover from the spill.”
BP shares fell $2.33 in early trading Thursday to $45.38 on the New York Stock Exchange. Transocean shares rose 50 cents to $38.54. Halliburton shares dipped 11 cents to $67.47.