Judge says BP contract gives partial shield to Transocean

NEW ORLEANS — 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 on Thursday.

The ruling comes 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 Thursday’s ruling could spur further talks.

Eric Schaeffer, who led the Environmental Protection Agency’s civil enforcement office from 1997 to 2002, said Thursday’s ruling will 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.”

11 Comments

  1. w00t

    That stocks gonna’ plung faster than Obama’s approval rating.

    #1
  2. adro

    Won’t the stock go up since they are shielded?

    #2
  3. Save Our Environment

    Put TO out of business. Someone else can pick up where they left off. After all O&G is government subsidized. Just money changing hands.

    #3
  4. mark

    You can bet not many companies are going to sign these no fault contracts in the future. BP got the shaft on this unless the can prove TransOcean was deliberately negligent, untrained and unskilled. It was TransOceans rig,their crew and a big reason the well blew out yet they get off with nothing.

    #4
  5. Duggy Ramjet

    Another prime example of someone or some corporation above the law.

    #5
  6. Thad

    Lets not lose sight of the facts, it was BP’s well, BP made all decisions and all actions were with BP approval. And it was BP negligence that caused the blow-out. TransOceans alleged failures would not have happened if BP had not caused the blow-out.

    #6
  7. chiefdecoy

    Wonder who shielded them?
    That darned ole Bush!!
    Oh, wait…..

    (glad I work for Noble)

    #7
  8. Monty Video

    Thad, BP well but Transocean men on the brake and who may have tried to activate the BOP – one certainly did and it didn’t work. We will never know though if someone tried earlier – very very sadly they died.
    Very few of the real time decisions made that night were BP’s. Had there been presumably there would have been some BP employees who died as well.
    The court will decide and have more evidence to decide from than you or I.
    However as the Court has decided not to protect TO from paying their part of the billions in Clean Water Act fines that are to come, I doubt TO are popping the champagne corks.

    #8
  9. Tex

    Thad,

    You need to read up on your history. The TransOcean Driller was responsible for overseeing the mud system and keeping volume control. His only job during this face of the operation was to keep track of volumes. He did not and he failed to recognize important signals from the well.

    There is an old saying “the well is talking”. The well “talked” in this case, the Driller did not listen and reacted when it was way too late. There are many reasons for the failure to react. Talking with crew members, turning off alarms, not paying attention, lack of well-control training and understanding of well construction and control.

    There is no doubt in my mind that a good and attentive Driller would have recognized the problem, shut in the well and prevented a tragic accident.

    Shielding TransOcean is an insult to those who died and those who were affected by Macondo.

    #9
  10. Trail_Tramp

    No doubt Transocean shares in the blame, but as I’ve stated many times before on these forums…blame and legal liability are NOT the same thing.

    #10
  11. Trail_Tramp

    @Thad Tex is right. The rig crew was not paying attention to what the well was doing. Taking kicks is a part of drilling in the Gulf and good drillers deal with them all the time. What got them on the Macondo well was that you do not expect to take a kick AFTER you have cemented the casing. A good driller knows to never turn your back on a well.

    #11