Email this page

News

United States Files Civil Suit Against BP

Today, the United States filed a 27-page Complaint against BP and eight other companies in U.S. District Court for the Eastern District of Louisiana to recover civil penalties and costs (including damages to natural resources) associated with the oil spill in the Gulf of Mexico that began after an explosion on the Deepwater Horizon offshore oil rig. Oil flowed from the deepwater "Macondo Well" for nearly five months from April 20, 2010 until September 19, 2010. Maximum civil penalties, based upon current spill estimates, could reach $20 billion or more.

In addition to BP, the United States sued Anadarko Exploration & Production LP ("Anadarko Exploration"), Anadarko Petroleum Corporation ("Anadarko Petroleum"), MOEX Offshore 2007 LLC ("MOEX"), Triton Asset Leasing GmbH ("Triton"), Transocean Holdings LLC ("Transocean Holdings"), Transocean Offshore Deepwater Drilling Inc. ("Transocean Offshore"), Transocean Deepwater Inc.("Transocean Deepwater"), and QBE Underwriting Ltd., Lloyd's Syndicate 1036 ("Lloyd's").

The United States alleges that each of the Defendants except for Lloyd's were either an owner, operator, and/or person in charge of the well, the well casing, the well casing head, and/or the Deepwater Horizon rig and, through either action or inaction, are responsible for the Deepwater Horizon Spill. The United States alleges that Lloyds is also financially responsible for the liabilities of one or more of the Transocean defendants and Triton under Section 1017(f)(2) of the Oil Pollution Act, 33 U.S.C. § 2717(f)(2).

The Complaint was filed under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 et seq., the Clean Water Act, ("CWA"), 33 U.S.C. §§ 1251 et seq., and Section 1017(f)(2) of the Oil Pollution Act of 1990 ("OPA"), 33 U.S.C. § 2717(f)(2).

The United States seeks: (1) a declaration that the Defendants are responsible and strictly liable for unlimited removal costs and damages, including damages to natural resources, under the Oil Pollution Act of 1990; and (2) civil penalties under Section 311 of the Clean Water Act for each barrel of oil that the Defendants discharged into the Gulf of Mexico. The United States also specifically reserved the right to amend its Complaint to add new claims and new defendants as their investigation progresses.

The total amount and type of damages is currently unclear and will likely take many years to determine. The Oil Pollution Act generally limits liability for the collection of damages from an offshore facility to the total of all removal costs plus $75 million. See 33 U.S.C. § 2704(a)(3). In this case, the United States has alleged that it has sustained damages "far exceeding" $75 million.

The United States seeks penalties in a range up to $1,100 per barrel of oil that has been discharged or up to $4,300 per barrel of oil that has been discharged if it can prove that the discharge of oil was the result of gross negligence or willful misconduct by any Defendant. Although the Complaint does not allege the discharge of a specific amount of oil, and the amount of oil discharged will be a key subject of dispute in the litigation, it has been estimated that approximately 5 million barrels of crude was discharged into the Gulf of Mexico while the well was flowing uncontrolled.

Based upon this 5 million barrel estimate, the Defendants (except Lloyd's) could face a potential penalty up to $21.5 billion if the United States were able to prove that the discharge of oil was the result of gross negligence or willful misconduct and the Court were to assess the maximum penalty under Section 311 of the Clean Water Act. Currently, the highest penalty that the United States has obtained for violations of Section 311 of the Clean Water Act is $34 million, obtained in the Colonial Pipeline Case for the discharge of approximately 25,000 barrels of oil from 5,500 miles of pipeline in five states. See Colonial Pipeline Fact Sheet. The Colonial Pipeline penalty constitutes approximately $1,400 per barrel of oil spilled. If the same penalty per barrel were assessed against BP and the other Defendants (expect Lloyd's) the penalty would be approximately $7 Billion per defendant. (Note: the United States did not pursue civil penalties against Exxon for the Valdez Spill.)

Some of the issues of interest in this case are: (1) the application of the $75 million damages cap vis-à-vis the non-BP Defendants (BP has already stated it will waive this cap); (2) the calculation of the total barrels spilled and whether the United States can prove gross negligence or willful misconduct; (3) the fact that the United States decided to file a civil case before a criminal case (unlike in Exxon Valdez); (4) the resolution of claims between BP and the other Defendants; (5) possible future action against Halliburton, which was not named in this suit; and (6) whether separate state actions will be joined with this action.

If you have questions regarding this case or its implications, please contact David Van Slyke or Jeff Talbert with Preti Flaherty's Environmental Group.