BP, Halliburton and Transocean Found Negligent in Deepwater Horizon Spill

A federal judge has ruled that BP is guilty of gross negligence in the 2010 Deepwater Horizon spill in the Gulf of Mexico.

U.S. District Judge Carl Barbier also found Halliburton Co. and Transocean Ltd. negligent, but not to the extent that BP was in causing the disaster, which began with an explosion on Transocean’s offshore drilling rig on April 20, 2010 and ended up spilling an estimated 4.9 million barrels of oil into the Gulf for three months.

“BP’s conduct was reckless,” Barbier wrote in his decision handed down in New Orleans federal court on Sept. 4. “Transocean’s conduct was negligent. Halliburton’s conduct was negligent.” He said BP’s share of the blame was 67 percent, Transocean’s was 30 percent, and Halliburton’s fault was 3 percent.

Britain’s BP was the principal defendant in the case because the rig was drilling for BP-owned oil in the Macondo well. Transocean, a Swiss company, also was a defendant because it owned the rig, named Deepwater Horizon. Halliburton, a Houston oilfield services company, was named because it provided the cement for the walls of the well.

The ruling was a critical milestone in a legal case that is looking at the cause of the worst offshore oil spill in U.S. history, the impact on victims of five states with coastlines on the Gulf, and who was liable for how much.

The plaintiffs include the U.S. government, the five states affected, banks, seafood purveyors and fishermen who, combined, lost billions of dollars because of the spill. The ruling resolves some of the issues but appeals may drag on for years before a final settlement is reached.

BP already has set aside $3.5 billion to cover what it may have to pay in compensation.

The judge still has not ruled on exactly how much oil was spilled, which will be an important element in determining the company’s liability. Yet Barbier’s ruling of gross negligence could lead to BP being fined $18 billion, the maximum penalty under the Clean Water Act, if he eventually agrees with U.S. prosecutors that more than 4 million barrels of oil were spilled.

The decision could also expose BP to unspecified punitive damages for claimants who weren’t part of the $9.2 billion settlement the company reached with most non-government plaintiffs in 2012. Barbier did not address that in his ruling.

Because Transocean and Halliburton were guilty of only simple negligence, not gross negligence, they will not be liable for the same punitive damages. Further, on Sept. 2, Halliburton reached a settlement in the same court under which it agreed to pay $1.1 billion to resolve most of the claims against it.

As the disaster was unfolding during the summer of 2010, it was discovered that the drilling project had been plagued by equipment failures and questions about proper supervision. The federal government responded with new regulations on safety practices for such offshore projects.

By Andy Tully of Oilprice.com