BP found grossly negligent in 2010 Gulf of Mexico oil spill

Company may have to pay billions more over 2010 Gulf of Mexico disaster as judge rules the company 'was reckless' and largely to blame

PUBLISHED : Friday, 05 September, 2014, 1:26am
UPDATED : Friday, 05 September, 2014, 1:26am

BP acted with gross negligence in setting off the biggest offshore oil spill in US history, a federal judge ruled, handing down a long-awaited decision that may force the energy company to pay billions of dollars more for the 2010 Gulf of Mexico disaster.

US District Judge Carl Barbier held a trial without a jury over who was at fault for the environmental catastrophe, which killed 11 people and spewed oil for almost three months into waters that touch the shores of five states.

The case also included Transocean and Halliburton, though the judge didn't find them as responsible for the spill as BP.

"BP's conduct was reckless," Barbier wrote in a decision yesterday in New Orleans federal court. "Transocean's conduct was negligent. Halliburton's conduct was negligent."

Barbier apportioned fault at 67 per cent for BP, 30 per cent for Transocean and 3 per cent for Halliburton. BP shares fell as much as 5.3 per cent.

The ruling marks a turning point in the legal morass surrounding the causes and impact of the disaster. Four years of debate and legal testimony have centred on who was at fault and how much blame each company should carry.

The coalition of plaintiffs included the federal government, five Gulf of Mexico states, banks, restaurants, fishermen and a host of others who have pursued redress for their losses. While yesterday's ruling provides a partial answer, appeals may mean it will be years before final penalties are settled.

BP, which may face fines of as much as US$18 billion, has set aside US$3.5 billion to cover those penalties.

The company had taken a US$43 billion charge to cover all the costs related to the spill, according to a July 29 earnings statement. The ultimate cost is "subject to significant uncertainty", BP said.

Barbier has yet to rule on how much oil was spilled, a key factor in determining the extent of BP's liability.

The decision nevertheless may expose BP to unspecified punitive damages for claimants who weren't part of the US$9.2 billion settlement the company reached with most non-government plaintiffs in 2012. The judge left that unclear in his ruling.

"Although BP's conduct warrants the imposition of punitive damages under general maritime law, BP cannot be held liable for such damages under Fifth Circuit precedent," he wrote, referring to the federal appellate jurisdiction including Louisiana.

In a footnote, however, Barbier wrote that BP might be liable for punitive damages for other claims.

With only a ruling of negligence, Transocean escapes any such liability.

Halliburton, which also won an earlier indemnity ruling, removed the threat of punitive damages by agreeing to a US$1.1 billion settlement with most plaintiffs on September 2.

The blowout and explosion aboard the Deepwater Horizon drilling rig on April 20, 2010, caused the deaths of 11 workers and spilled millions of barrels of crude oil into the Gulf, harming wildlife and fouling hundreds of miles of beaches and coastal wetlands.

Equipment failures and questions about lapses in oversight led to an overhaul of federal regulations governing offshore safety in the following years. The agencies overseeing deep-water drilling were reorganised, with new rules put in place to strengthen requirements for equipment, inspections and accident response.

The accident sparked thousands of lawsuits against BP; Vernier, Switzerland-based Transocean, which owned the drilling rig; and Houston-based Halliburton, which provided cement for the well.