Vessels monitor a oil burn in the area of the Deepwater Horizon disaster on the Gulf of Mexico, Tuesday, July 13, 2010. BP officials have placed a containment cap over the leak in hopes that the flow of oil will be diminished. (AP Photo/Dave Martin)
President Barack Obama makes a statement after being briefed on the BP oil spill relief efforts in the Gulf Coast region, Friday, June 4, 2010, at Louis Armstrong International New Orleans Airport in Kenner, La. (AP Photo/Charles Dharapak)
Protesters gather outside of the BP offices in San Francisco on Wednesday, May 12, 2010 to demonstrate against the Gulf oil rig disaster. (AP Photo/Marcio Jose Sanchez)
This image from video provided by BP PLC early Sunday morning, June 13, 2010 shows oil continuing to pour out at the site of the Deepwater Horizon oil well in the Gulf of Mexico. The Coast Guard has demanded that BP step up its efforts to contain the oil gushing into the Gulf of Mexico by the end of the weekend, telling the British oil giant that its slow pace in stopping the spill is becoming increasingly alarming as the disaster fouled the coastline in ugly new ways Saturday. (AP Photo/BP PLC) NO SALES
This image from video provided by BP PLC early Sunday morning, June 20, 2010 shows oil continuing to gush millions of gallons a day, from the broken wellhead, at the site of the Deepwater Horizon oil well in the Gulf of Mexico. (AP Photo/BP PLC) NO SALES
GULF SHORES, AL - JUNE 08: Workers pick up oil patches and tar that washed up on the beach at Bon Secour National Wildlife Refuge from the Deepwater Horizon oil spill in the Gulf of Mexico on June 8, 2010 in Gulf Shores, Alabama. Early reports indicate that BP's latest plan to stem the flow of oil from the site of the Deepwater Horizon incident may be having some success. (Photo by Joe Raedle/Getty Images)
Oil floats in the Gulf of Mexico near Orange Beach, Alabama, U.S., on Friday, June 18, 2010. The BP Plc oil spill, which began when the leased Transocean Deepwater Horizon oil rig exploded on April 20, is gushing as much as 60,000 barrels of oil a day into the Gulf of Mexico, the government said. Photographer: Kari Goodnough/Bloomberg
Oil cleanup workers hired by BP pick up oil on the beach in Gulf Shores, Ala., Friday, July 2, 2010. Oil from the Deepwater Horizon incident is expected to come ashore over the July 4th weekend. (AP Photo/Dave Martin)
In this image taken from video provided by BP PLC at 18:17 CDT, a new containment cap, top, is lowered over the broken wellhead at the site of the Deepwater Horizon oil spill in the Gulf of Mexico, Monday, July 12, 2010. Deep-sea robots swarmed around BP's ruptured oil well Monday in a delicately choreographed effort to attach the tighter-fitting cap that could finally stop crude from gushing into the Gulf of Mexico nearly three months into the crisis. (AP Photo/BP PLC) NO SALES
This combo made from images taken from video provided by BP PLC shows oil flowing from two of three valves on the new 75-ton cap atop the site of the Deepwater Horizon oil spill in the Gulf of Mexico at 17:04 CDT Wednesday, July 14, 2010, left, and the top of the cap at 17:56 CDT on Thursday, July 15, minutes after the flow of oil was choked off. BP vice president Kent Wells said the oil stopped flowing into the water at 14:25 CDT after engineers gradually dialed back the amount of crude escaping through the last of three vents in the cap, an 18-foot-high metal stack of pipes and valves.(AP Photo/BP PLC) NO SALES
The view from an approaching helicopter shows the armada of drillships and other vessels surrounding the site of the blown out BP well in the Gulf of Mexico about 40 miles off the coast of Louisiana. Credit Brett Clanton / Chronicle
Oil gushes from a valve atop the failed blowout preventer (BOP) at the BP Deepwater Horizon oil spill site in the Gulf of Mexico off the coast of Louisiana, U.S., in an image captured by the Skandi remotely operated underwater vehicle (ROV) camera at 7:35 a.m. Central Standard Time (CST) on Tuesday, July 13, 2010. BP Plc installed a new cap on its leaking Gulf of Mexico oil well and will start testing today whether this will stop the gusher while work continues on a permanent plug. Source: BP Plc via Bloomberg
EDITOR'S NOTE: EDITORIAL USE ONLY. NO SALES.
GULF OF MEXICO, LA - JULY 27: (EDITORS NOTE: Distortion caused by heat.) Ships assist in clean up and containment near the source of the BP Deepwater Horizon oil spill July 27, 2010 in the Gulf of Mexico off the coast of Louisiana. Work continues to put a permanent plug on the well which has leaked an estimated three to five million barrels of oil. (Photo by Chris Graythen/Getty Images)
Hairdresser Karen Jackson wears a t-shirt that reads "We've been BPeed on!" on the front of the shirt and "Gulf Oil Disaster 2010-??" on the back Saturday, July 3, 2010, in Orange Beach, Ala. Jackson says she is worried about the effect the spill is having on her community and what will happen if local business continues to falter. "I would hate to have to leave this place. We love it here." She said her business is way off what it should be for the season, "down here we make all of our money in the summer," she says. Her husband's work as an electrician has dried up she says, so he has signed on to work cleanup for BP. ( Smiley N. Pool / Houston Chronicle )
A driver rolls down the highway with messages such as "$ave the Gulf Coa$t" and "Tony Hayward C.E. O of B.P. Give us out Live Back" while driving Sunday, June 27, 2010, in Pensacola, Florida. ( Smiley N. Pool / Houston Chronicle )
This still image from a live BP video feed shows a view from a submersible while checking the integrity of the well head on August 3, 2010 in the Gulf of Mexico. BP prepared Tuesday to plug the worst oil leak in history, although the Gulf of Mexico region will be counting the environmental and economic costs for years, perhaps decades, to come. Already delayed by a week due to Tropical Storm Bonnie, the long-awaited "static kill" was put off again at the last-minute when a leak was discovered on Monday in the cap that has been sealing the runaway well since July 15. US spill chief Thad Allen said the leak had been stopped overnight and that the operation to ram in heavy drilling fluids, known as mud, would commence as soon as "injectivity tests" had given the procedure the all-clear. AFP PHOTO / BP == RESTRICTED TO EDITORIAL USE / NO SALES / NO MARKETING / NO ADVERTISING CAMPAIGN == (Photo credit should read HO/AFP/Getty Images)(Photo Credit should Read /AFP/Getty Images)
In this image taken from video provided by BP PLC at 12:23 a.m. EDT, Saturday Sept. 4, 2010 Aug. 3, 2010 shows the blowout preventer that failed to stop oil from spewing into the Gulf of Mexico being raised to the surface. The blowout preventer wasn't expected to reach the surface until Saturday, at which point government investigators will take possession of it. (AP Photo/BP PLC) NO SALES
DAUPHIN ISLAND, AL. | JULY 4, 2010 : A cleanup worker, wearing a protective coverall and carrying a small scoop, punctuates an otherwise typical holiday beach scene as patrols the beach looking for tar balls on Independence Day. While exact numbers are elusive, tourist business along the Gulf Coast all reported feeling the sting of lost income from a noticeable dip in tourism this summer following the Deepwater Horizon spill.
GULF OF MEXICO | JUNE 26, 2010 : Streaks of oil are seen on the surface of the water near the site of the Deepwater Horizon spill in the Gulf of Mexico. The amount of oil spilled, and what happened to the oil remains in debate, but in August, the Department of Energy and United States Geological Survey announced, that it estimated a total of 4.9 million barrels of oil had been released from the BP Deepwater Horizon well.
GRAND ISLE, LA. | JULY 15, 2010 : Oil containment boom floats just off the pier as fishermen cast lines near the bridge leading to the island after sun sets on the first full day of fishing after a ban on sport fishing was lifted. Commercial fishing remained closed, but happy recreational fishermen flocked to the water on a beautiful evening. Most were BP contractors working on the cleanup. One was Bobby Walker of Houma, La., who said he had been coming to the island to fish for over 30 years and praised the great fishing and natural beauty of the island. "But who would have ever thought I would be here all summer working on the oil spill."
A legal brawl that began with the deadly Deepwater Horizon rig explosion and Gulf of Mexico oil spill nearly two years ago is within weeks of a courtroom showdown that many parties would prefer to avoid through a settlement.
The British oil giant BP has said as much.
“We are ready to settle, if we can do so on fair and reasonable terms,” CEO Bob Dudley said last week as BP announced its quarterly financial results. “But we are preparing vigorously for trial.”
That trial is scheduled for Feb. 27 before U.S. District Judge Carl Barbier of New Orleans, who will hear the case without a jury.
In what is just the first phase of a complex plan for litigating all the claims and counterclaims arising from the accident, Barbier will determine how to allocate liability for the damages it caused.
BP owned the Macondo well that blew out and triggered the April 2010 disaster.
Other parties are Transocean, which owned and operated the Deepwater Horizon; Halliburton, which cemented the well; federal, state and municipal governments; and more than 100 individual claimants.
The blowout and explosion killed 11 workers, caused the worst offshore U.S. oil spill and generated one of the most complex environmental law cases ever.
BP has allocated $36 billion for a potential payout related to the accident, according to its financial statements.
Several experts following the case believe that many of the parties – especially the corporate and government plaintiffs and defendants – will agree to at least partial settlements before or during the trial.
The federal government might agree to a settlement of $20 billion to $25 billion – well below what defendants could risk at trial – said David Uhlmann, a University of Michigan law professor who headed the Justice Department’s Environmental Crimes Section for seven years.
“This is a case that should settle, at least as it pertains to the government claims against BP and the other companies involved in the Gulf oil spill,” Uhlmann said. “The companies do not have good defenses, and going to trial risks higher penalties and months of bad publicity.”
One uncertainty is the civil penalties that BP and others might face under the Clean Water Act. Those damages vary significantly depending upon whether violations are determined to have resulted from negligence or gross negligence. The penalty is up to $1,100 per barrel spilled through negligence, and up to $4,300 per barrel spilled through gross negligence.
The government has estimated the three-month spill spewed 4.9 million barrels of crude into the Gulf, but the spill’s size is one issue in dispute.
That means the companies and government would have billions riding on whether the government could meet the higher burden of proving gross negligence – a gamble that gives both an incentive to settle. And that risk only involves the potential civil penalties under the Clean Water Act, not other potential environmental violations.
The Clean Water Act also carries criminal penalties, and criminal investigations are ongoing but so far have not resulted in any charges.
Depending upon which if any of the parties settle, Barbier’s task starting Feb. 27 will be to determine liability for the accidents and the proportion of liability that each company must assume.
The next phase of the case would be assessment of compensatory and punitive damages, which are governed by federal maritime law, said Blaine LeCesne, a tort law professor at Loyola University.
Compensatory damages are for actual harm suffered, and punitive damages punish behavior.
In the case that arose from the 1989 Exxon Valdez oil tanker spill, compensatory and punitive damages were assessed on a 1-to-1 ratio. But the ratio could be different depending upon whether the judge relies on that earlier case as precedent.
The majority of corporate civil cases settle before a trial, legal experts said, but the multiple parties involved in the Gulf spill litigation make negotiations much more complicated than in most such cases.
While most individual plaintiffs signed away their right to sue in exchange for a payment from a $20 billion fund BP set up in 2010, scores of cases still remain.
“The biggest problem is that there are so many moving parts, so many defendants, so many plaintiffs – some of which are aligned, and some are not,” said Dane Ciolino, a Loyola law professor who specializes in maritime law.
“This is very unusual litigation. It’s not just one big class action against one company. In terms of the cleanup efforts, figuring out who was at fault, and the damages – tax losses, economic, environmental – the litigation is sprawling. No one has ever seen anything quite like it.”