Spill case turns to how much oil reached Gulf

BP and the U.S. government, having shifted their positions several times about the amount of oil that flowed from a runaway Gulf of Mexico well in 2010, pivot back to court this week, with both sides hoping to convince a judge they now have the number right.

Big money is at stake as a civil trial over the worst offshore oil spill in American history resumes Monday. BP has pegged its overall spill tab at $42 billion, but that figure could grow significantly depending on the outcome in federal court in New Orleans.

For now, a settlement has been elusive, so the British oil giant is rolling the dice before U.S. District Judge Carl Barbier.

“The next four weeks, BP is going to take the hard knocks,” Tulane University law professor Edward Sherman said, using the parties’ estimates of the proceeding’s duration.

The trial’s second phase will focus on the volume of oil that entered the Gulf during the nearly three months it took London-based BP to cap its blown-out well a mile beneath the sea off the coast of Louisiana. Also at issue will be whether BP’s efforts to control the flow of oil — referred to in court papers as “source control” — were reasonable based on the information known at the time or unnecessarily extended the duration of the spill.

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Experts from around the world will be called by the parties and will testify about how they arrived at their conclusions.

Barbier will determine the spill total and then decide during a later proceeding how much BP, as operator of the well and its majority owner, should pay in fines under the Clean Water Act. Anadarko Petroleum, which had a minority stake in the well, also is a defendant in the second phase, though it has argued that it was a passive investor.

The Justice Department, which is seeking maximum fines for BP, said in court papers that BP’s latest calculations contradict evidence presented to Barbier in an earlier phase of the case.

In recent court filings, the government said it will argue that 5 million barrels of oil were discharged by the Macondo well and about 4.2 million barrels of oil entered the Gulf, slightly higher totals than it said in August 2010 when it announced the findings of a team of scientists gathered to calculate the flow rate. Earlier on, the government stated smaller amounts of oil were flowing from the well, but it has said it was relying for at least part of the time on information from BP.

BP will argue that 3.26 million barrels of oil were discharged by the well and about 2.45 million barrels entered the Gulf. Early on, BP stated much smaller amounts of oil were flowing, and it later pleaded guilty to misleading the government about the flow rate.

Both sides have stipulated that about 800,000 barrels of oil were collected at the wellhead before entering the Gulf, and the Justice Department has agreed not to seek fines on that oil.

The Clean Water Act allows fines of $1,100 to $4,300 per barrel of oil discharged into the sea, depending on whether a well operator was grossly negligent. The maximum fine would be $18.1 billion under the government’s spill estimate and $10.5 billion based on BP’s total. The judge has leeway to go lower than the range of fines allowed under the law.

BP argues in court papers that at the time of the disaster it was prepared to respond to a deep-water blowout, and that it “could not, and did not, execute source control procedures without federal government approval.”

BP and Anadarko say that calculating the flow of oil was no less challenging than the “innovative engineering approaches and unprecedented efforts” employed to stop the flow.

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Barbier has not yet decided how to apportion blame for the Deepwater Horizon rig explosion that killed 11 men and the oil spill that followed. He still must decide whether BP, rig owner Transocean and cement contractor Halliburton were grossly negligent, a key issue during the first phase of the trial that wrapped up in April.

A gross negligence finding, in addition to allowing for the potential of maximum fines for BP, would also open the door to punitive damages for BP and its partners on the well job. Plaintiffs’ lawyers suing the companies on behalf of spill victims will get a chance to further the case for punitive damages during the portion of the second phase of the trial that will deal with BP’s efforts to control the flow of oil.

Barbier is putting the lawyers in the case on short leashes.

He has ordered that on source control, the only relevant issue will be the efforts to collect, control or halt the flow of oil using subsea systems and technologies from April 20, 2010, the day of the well blowout, to Sept. 19, 2010, the day the well was declared permanently sealed.

Efforts to disperse the oil using chemicals or to contain the oil on the surface using booms or skimming devices have been deemed irrelevant.

Barbier said the issue of how much oil spilled will involve the amount actually released into the Gulf as a result of the incident from the time when the releases began until the Macondo well was capped on July 15, 2010. That stopped the oil flow, two months before BP permanently cemented the well shut.

Barbier has set aside the first four court days to address source control and then another 12 court days to quantify the spill. There will be no testimony on Fridays.

During the source control segment, plaintiffs’ lawyers will align themselves with Transocean, Halliburton and the states of Louisiana, Alabama, Texas, Mississippi and Florida. On the other side will be BP and Anadarko. During the quantification segment, the U.S. Justice Department will face BP and Anadarko.

The judge has set strict time limits for each side to present opening statements and their evidence.

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Blaine LeCesne, a law professor at Loyola University in New Orleans who has followed the case, said BP is risking little by proceeding with the trial if the Justice Department was unwilling to budge on its demand for the maximum fine. The plaintiffs and the Gulf states are also seeking big damage awards.

But if BP’s gamble fails, its spill tab could balloon to between $60 billion and $80 billion, he said.

LeCesne said a judicial finding of gross negligence “would not only substantially increase the Clean Water Act fines, but also serve as a predicate for the award of punitive damages down the line.”