BP Fails to Shift $15 Billion Gulf Oil Spill Costs to Transocean
A U.S. federal judge on Thursday 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.
However, 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 related to the spill, although maximum possible fines could top $20 billion if gross negligence was established on the part of BP or its contractors.
BP has made no provision for punitive damages because it says there is no legal basis for them. Barbier has limited the cases in which claims for punitive damages can be brought.
Thursday’s 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.
Shares of Transocean rose 8.2 percent at 0856 GMT, while BP shares fell 1.7 percent.
Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill.
BP has said it would like to reach an out of court settlement with Transocean but Barbier’s ruling makes its negotiating position weaker.
Both sides claimed victory over the ruling, which Transocean spokesman Lou Colasuonno said “discredits BP’s ongoing attempts to evade both its contractual and financial obligations”.
BP said the decision “holds Transocean financially responsible for any punitive damages, fines and penalties flowing from its own conduct.
“As we have said from the beginning, Transocean cannot avoid its responsibility for this accident,” spokesman Daren Beaudo said in an emailed statement.
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.
However, plaintiffs lawyers say compensatory claims could even end up totaling more than the $20 billion BP has set aside in its gulf coast restoration fund.
Two U.S. government probes have put most of the blame for the disaster on BP, suggesting BP is likely to face the largest share of any fines levied.
The New Orleans-based judge has set a Feb. 27 start date for a trial to apportion blame.
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.