A Transocean Ltd. unit asked a U.S. judge to order BP Plc to honor a blanket indemnity against oil spill damages that the Deepwater Horizon rig owner claims was part of its drilling contract.
Transocean has claimed for more than a year that its drilling contract protects the company from paying any damages caused by more than 4.1 million barrels of crude that spewed from BP’s Macondo well off the Louisiana coast last year.
Transocean, based in Vernier, Switzerland, claims the indemnity provision requires BP to pay virtually all damages and cleanup costs, even if the drilling rig or rig crew was grossly negligent in causing the disaster. The federal Oil Pollution Act allows a contract to override BP’s rights to contribution for spill damages, Transocean said in court papers today.
“There is no genuine dispute as to the terms of the governing drilling contract, which unambiguously require BP to defend, indemnify and hold Transocean harmless for the pollution claims at issue in this litigation,” the rig owner said. “It is settled law that an express indemnity trumps rights of contribution.”
Transocean asked U.S. District Judge Carl Barbier today to rule in favor of the rig owner and to enforce the drilling contract indemnity.
More than 350 lawsuits representing thousands of claims by coastal property owners and businesses for oil-spill damages are consolidated before Barbier in New Orleans for pretrial processing. BP and Transocean and other companies involved in the drilling project face billions of dollars in damages claims in these suits.
BP sued Transocean in April to recover a part of more than $40 billion, claiming the drilling contractor shares blame for the disaster. Transocean filed counterclaims against BP accusing the oil company of breaching their contract by failing to defend the rig owner and hold it harmless against all claims.
Two government probes into causes of the Deepwater Horizon explosion found that both BP and Transocean were at fault for causing the blast that led to the worst offshore spill in U.S. history.
London-based BP claims Transocean’s conduct voided the indemnity clause. The oil giant contends the drilling company must pay its own share of any damages, which will be determined by a trial set to begin in February.
“With respect to paying compensation to those in the Gulf, Transocean cannot avoid its own responsibilities because it has materially breached the drilling contract and prejudiced BP in doing so,” BP spokesman Daren Beaudo said yesterday in an e- mailed statement. “Indemnification therefore is not available under applicable law. To enforce the indemnification would be to allow Transocean to escape the consequences of its actions and avoid meeting its obligations in the Gulf.”
Transocean said that BP promised to indemnify it “for any and all pollution obligations” except those originating on or above the surface of the water. This included any “loss, damage, expense, claim, fine, penalty, demand or liability,” Transocean said, citing the contract.
The drilling contract required Transocean to defend and pay for injury or death of the rig owner’s employees, Transocean said. “Transocean also accepted the liability and agreed to indemnify BP for loss or damage to the drilling unit,” the company said.
The contract was a “standard oil patch contracting agreement similar” to others entered into before and after the Macondo failure, Transocean said. “BP and Transocean have entered into similar agreements with each other since the Macondo blowout,” the rig owner said.
BP’s posture over the indemnification clause “is not only offensive to the thousands of men and women who work together at Transocean, but it constitutes a direct threat to the sanctity of contracts and to the economic underpinnings of an industry that employs hundreds of thousands of people in the United States alone,” Nick Deeming, senior vice president and general counsel of Transocean, said in a statement.
The motion “is about the future of the contract drilling industry at large,” Deeming said. “If BP truly intends to make things right, it must either voluntarily or by the order of the court honor all of its contracts — not just the ones that serve its convenience or financial purposes.”