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Don't Blame Transocean for Macondo Spill, Fifth Circuit Tells BP, Anadarko

BP plc and Anadarko Petroleum Corp. may not avoid federal fines by claiming another company's equipment caused the 2010 Macondo blowout disaster in the Gulf of Mexico, a New Orleans three-judge panel ruled Wednesday.

The oil that spilled came from a well owned/operated by BP (65%) and nonoperating partners Anadarko (25%) and Japan's Mitsui Ltd. (10%), noted the U.S. Court of Appeals for the Fifth Circuit. The liability for the oil spill may not be shifted to Transocean Ltd.'s Deepwater Horizon drilling rig nor its blowout preventer (BOP), said the court.

The ruling upholds a decision made two years ago by U.S. District Judge Carl Barbier, who is overseeing the multi-district litigation (see Daily GPI,Feb. 24, 2012). At that time, Barbier ruled that BP and Anadarko were liable for civil penalties under the federal Clean Water Act (CWA).

BP and Anadarko have argued that the failure of Transocean's BOP caused the explosion that destroyed the drilling rig, killing 11 men on April 20, 2010. The well wasn't capped until mid-July 2010. The producers claim that even though the oil was from their well, it spewed into the GOM from a riser, the pipe that was connected from the well to the rig. The riser was destroyed when the rig exploded.

"By all accounts, if the vessel's blowout preventer had functioned properly, the oil would not have entered navigable waters in violation of the Clean Water Act," Fifth Circuit Judge Fortunato P. Benavides wrote in an opinion signed by Judges Carolyn Dineen King and James L. Dennis. The CWA does not allow defendants facing civil penalties to shift liability, even though the arguments may reduce the amount of total damages.

"Although the defendants argue that the blowout preventer should have engaged and prevented the progression of the blowout, the need for this intervention only underscores the extent to which the oil was already unconfined and flowing freely," Benavides wrote.

A U.S. Department of Justice spokesman hailed the appeals court decision. "We hope the court's decision will be one more step toward reaching a just conclusion for the American people," he said.

In Barbier's original ruling in early 2012, he suggested that Transocean might be liable for civil penalties under the CWA, but he said he was unsure whether Transocean met the definition of the term "operator." Following Barbier's ruling, Transocean pleaded guilty to a misdemeanor CWA violation and in early 2013 agreed to pay a $1.4 billion fine (see Daily GPI, Jan. 4, 2013). Mitsui also has settled, agreeing in early 2012 to pay U.S. officials $70 million in CWA penalties and $20 million for environmental restoration along the Gulf Coast (see Daily GPI, Feb. 22, 2012).

Assuming Mitsui's 10% ownership in Macondo, the CWA penalty at that time equaled a fine of about $175/bbl; the maximum penalty for gross negligence under the law is $4,300/bbl. Mitsui also agreed three years ago to pay BP $1.1 billion to cover its share of the cost to compensate businesses and individuals impacted (see Daily GPI, May 23, 2011). Anadarko also agreed to pay BP $4 billion for the spill compensation fund.

The Fifth Circuit ruling is the second by the court in less than two weeks to oppose BP arguments. The circuit court in late May ordered BP to resume paying compensation claims under its original $7.8 billion plaintiff settlement agreement even though the U.S. Supreme Court has been asked to review it (see Daily GPI, May 21). Supreme Court Justice Antonin Scalia is tasked with reviewing the decision; he may act on BP's request or refer the matter to the nine justices as a whole (see Daily GPI, May 29).

Meanwhile, the Chemical Safety Board was planning to issue an executive summary and the first two volumes of its report about the Macondo well blowout late Thursday in Houston. The agency indicated that it has new details on why the BOP failed, as well as comparisons of post-spill safety regulations in the United States and abroad.

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