BP seeks settlement prior to civil trials to open Monday – Bellona calls for court

US Coast Guard

Publish date: February 25, 2013

Written by: Charles Digges

The US government and Gulf of Mexico Coast states are considering offering BP a deal under which it pays $16 billion to settle civil suits stemming from the deadly 2010 Deepwater Horizon explosion and oil spill, the Wall Street Journal reported Saturday.

Also under the gun are Transocean, which owned the Deepwater Horizon rig, which exploded during a massive blowout on April 20th, 2010, in which 11 were killed, and Halliburton, which was responsible for cementing the hole drilled by the rig in the Gulf of Mexico’s Macondo well.

Halliburton’s blowout preventer also failed, causing  4.1 million barrels of crude to spill into gulf waters in an uncontrollable spill that lasted for 87 days.

Bellona is against a deal and would prefer that the case proceed and expose, item by item, the failings of the oil industry that led up to the spill, and its insufficient practices to deal with it.

The deal would cover the BP’s potential penalties under the US Clean Water Act and payments under the Natural Resources Damage Assessment, the newspaper said, citing sources familiar with the discussions.

The Wall Street Journal reported late Friday that federal and state officials were preparing a $16 billion settlement offer that would cover both the Clean Water Act fines and environmental penalties related to the spill. “The ball is on BP’s side of the table,” said the lawyer, who spoke on the condition of anonymity because he was not authorized to speak publicly on the matter.

The lawyer briefed on the talks said that one problem with the current proposal was that it did not cover economic damages claimed by the states related to the spill. Such claims could still leave BP on the hook for billions more, in addition to the environmental damages.

Alabama, Florida, Louisiana, Mississippi and Texas are the states affected. According to the Wall Stree Journal report, the states are reportedly prepared to put forth the offer.

But it remained unclear if the deal has been formally offered to BP. The case will go to trial on Monday in New Orleans Louisiana. The US Justice Department had declined to comment.

The late negotiations among federal and state officials to find common ground represents progress, even if limited, in the search for a settlement. The five states have had sharp disagreements over how much BP should pay and how billions of dollars in potential settlement funds should be divided.

For instance, only Louisiana and Alabama, are participating in the trial starting on Monday, though Florida, Mississippi and Texas could be part of any settlement. Officials in Louisiana believe their state deserves the bulk of any settlement since its coastal waters, fisheries and businesses suffered the most. Florida and other states that escaped serious coastal damage instead want money for economic losses that they sustained.

Additionaly, billions of dollars could be assessed against BP in several ways, either through fines, or through penalties to redress environmental damage and payments to cover economic losses. And each of those methods represents a different set of stakes and consequences for each of the states and for BP.

If a deal is turned down and the case should go to trial, it is expected to last some three months, sources in the New Orleans federal court district said.

A settlement could avert this blistering courtroom beating BP would take over the worst ever US offshore oil spill, although the trial may begin as the terms of the deal are hammered out  – precisely what Bellona President Frederic Hauge hope to avoid.

“Let us see and examine the transgressions of the oil industry in the public eye,” he said. “A settlement arrangement would erase a critical part of the history of this oil spill – the truth needs to be told.”

“The duplicity of big oil need to be examined in court and blame assigned accordingly,” he added.

For that reason, the beginning of the trial today will be the subject of much international attention. The key to the case against BP is showing so-called “gross-negligence. If it is found the company did not react with due diligence to the spill it and its co-contractors caused, the cost per barrel of oil spilled will dramatically escalate.

If BP is found guilty of gross negligence, the cost it must pay per barrel of oil spilled during the worst oil spill in US history will escalate from $1,100 per barrel of oil spilled to $4,300 per barrel.

A settlement would put a solid number on BP’s costs under the Clean Water Act, which range from $4.5 billion to $17.5 billion, as well as potential natural resources damage assessments to the states under the Oil Pollution Act.

“BP doesn’t talk about possible offers or negotiations, but I can tell you we are ready for trial and looking forward to the opportunity to present our case starting Monday,” BP spokesman Geoff Morrell told reporters.

BP has spent or committed $37 billion on cleanup, restoration, payouts, settlements and fines, so far.

That figure includes an estimated $8.5 billion deal with most plaintiffs and a record $4.5 billion in penalties, and a guilty plea to 14 criminal counts to resolve criminal charges from the Justice Department and civil claims from the US Securities and Exchange Commission.

BP has said it would settle on “reasonable terms,” but was prepared to go to trial if the demands were “excessive and not based on reality.”

Safety culture under scrutiny

BP has been through three months of court settlements. Attention in the current suit will be focused on the company’s safety culture.

When the accident occurred, the Deepwater Horizon was drilling at a depth of 1,000 meters ­– an enormous but increasingly popular deep-sea endeavor being undertaken by oil companies, which poses very specific dangers that many environmental groups do not believe are being considered.

If the trail opens as expected, a number of witnesses will be paraded out who will testify to the level of the corporate safety culture of the oil major – and who could possibly prove that BP elected for cheaper and inferior methods in the interest of savings at the expense of the environment.

If the $16 billion deal is not struck, BP – as it says it is ready to do – will have to weather accusations in open court an testify about suspected safety violations.

According to the New Orleans daily, The Times-Picayune, the lawyers in the case expect a trial to quickly devolve into a he said-she-said-he-said among BP, Transocean and Halliburton. BP issued its own internal investigation of the incident which mostly deflected blame to Transocean and Halliburton.

BP, according to lawyers close to the case cited in US media, would try to exclude or limit the use of other accidents it hase caused throughout the world from the case.

“Judicially, wrapping up a settlement in a bow would evade instances of invidivual responsibiliy,” said Bellona’s Hauge. “This would cover up the massive failures of the oil industry on a point by point basis, and would be of no educational value to the world oil industry at large, and the degree to which they must be held accountable for their mistakes.”