BP Fails to Shift $15 Billion of Gulf Oil Spill Costs to Transocean
A U.S. federal judge said BP must uphold a clause in its contract with Transocean Ltd. that would shield the Swiss-based driller from compensatory damage claims related to the 2010 disaster. That means London-based BP may have to shoulder alone compensation claims brought by the likes of fishermen and hoteliers whose livelihoods were affected by largest offshore oil spill in U.S. history.
U.S. District Judge Carl Barbier left open the possibility that Transocean might still have to pay all or part of any punitive damages and civil penalties imposed by the U.S. government under the federal Clean Water Act.
Barbier, who oversees multistate litigation over the spill, ruled that BP need not indemnify Transocean for these.
BP has estimated civil fines of around $3.5 billion, although maximum possible fines could top $20 billion if gross negligence was established on the part of BP or its contractors.
The Jan. 26 decision means Transocean’s potential liability over the April 20, 2010, Deepwater Horizon drilling rig explosion that caused 11 deaths, was “materially diminished” analysts at UBS said in a research note. BP had previously sought to shift the whole cost of the disaster, currently estimated at around $42 billion, onto Transocean.
Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill.
BP has already paid out $7 billion in claims to third parties who have suffered losses and has an outstanding provision of $8.2 billion for further claims and litigation, suggesting third party claims are expected to top $15 billion. Plaintiffs lawyers say compensatory claims could end up totaling more than the $20 billion BP has set aside in its Gulf Coast restoration fund.
The case is In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.
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