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Transocean Agrees to Pay $1.4B for Macondo Blowout

Transocean Ltd., which owned the Deepwater Horizon drilling rig, has agreed to plead guilty to violating the Clean Water Act (CWA) and to pay $1.4 billion in civil and criminal fines and penalties in relation to the April 2010 deepwater Macondo well blowout in the Gulf of Mexico.

According to the U.S. Department of Justice (DOJ), Transocean has agreed to pay $400 million in criminal fines and penalties and to continue its cooperation in the government's criminal investigation of the Macondo blowout as part of a plea agreement, which is subject to court approval. In addition, pursuant to the terms of a proposed partial civil consent decree, Transocean Ocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc. and Triton Asset Leasing GMBH have agreed to pay an additional $1 billion to resolve federal CWA civil penalty claims for the oil spill at the Macondo well and the Transocean drilling rig Deepwater Horizon drilling rig, DOJ said.

Under terms of the civil settlement, Transocean must implement court-enforceable measures to improve the operational safety and emergency response capabilities at all of its drilling rigs working in waters of the United States.

Eleven men were killed when the BP plc-operated well blew out on April 20, 2010, causing the drilling rig to catch fire and sink. The resulting 87-day-long oil spill devastated the Gulf Coast in the worst oil spill in U.S. history.

"Transocean's rig crew accepted the direction of BP well site leaders to proceed in the face of clear danger signs -- at a tragic cost to many of them," said Lanny A. Breuer, assistant attorney general for DOJ's criminal division. "Transocean's agreement to plead guilty to a federal crime, and to pay a total of $1.4 billion in criminal and civil penalties, appropriately reflects its role in the Deepwater Horizon disaster."

Transocean said it plans to pay the fines and penalties over a five-year period using cash on hand and cash flow from operations. At the end of September the company had accrued an estimated loss contingency of $1.5 billion associated with claims made by DOJ. Transocean said it will pay $560 million this year, $460 million in 2014, $260 million in 2015, and $60 million in both 2016 and 2017.

Transocean' guilty plea agreement and criminal charge are part of the ongoing criminal investigation by the New Orleans-based Deepwater Horizon Task Force.

In November BP agreed to pay DOJ more than $4.5 billion in penalties and plead guilty to 11 felony counts of misconduct or neglect of ships officers relating to the deaths of the 11 men on the drilling rig (see NGI, Nov. 19, 2012). The government also indicted the two highest-ranking BP supervisors aboard the Deepwater Horizon during the disaster, charging them with 23 criminal counts including manslaughter. A trial is scheduled for 2014.

A federal judge recently approved a settlement BP plc reached in March with the Plaintiff's Steering Committee, agreeing to pay out $7.8 billion to resolve a "substantial majority of legitimate economic loss and medical claims" (see separate story this issue).

Last month a subsea survey for the fourth time confirmed the integrity of the Macondo well and the associated relief wells in the deepwater GOM. The visual inspection by BP and Transocean was to see if residual oil remained trapped under wreckage. The sheen is not recoverable and poses no risk to the shoreline, the U.S. Coast Guard said.

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