Just as this issue of the Report was being made ready to be sent to the printer, the oil spill trial, which had been scheduled to start on February 27th, was postponed for one week by Judge Carl Barbier. The PSC and BP issued a joint statement concerning the new trial date. If there is no settlement, the trial will start on March 5th in New Orleans. Predictably, things have been extremely active in this litigation. The trial preparation continues. I will summarize below some of the recent events of note:
• Judge Barbier, in an order dated February 26, which was a Sunday, postponed the trial for one week.
• The Plaintiffs’ Steering Committee has been gearing up for trial. The Court’s January 17, 2012 status report of the litigation presented a staggering account of just how hard the Plaintiffs’ Steering Committee (PSC) has worked on behalf of folks throughout the Gulf Coast. Specifically, 72 million pages of phase 1 documents have been produced since discovery began almost a year ago. Over the same time, 303 depositions have been taken and 7,278 documents have been marked as deposition exhibits. The parties are also designating deposition testimony and conducting depositions for phase 2 discovery, which will continue even as the phase 1 trial continues.
Given the Gulf Coast Claims Facility’s (GCCF) treatment of residents along the Gulf Coast, this process is a necessity. Those trying to discount the PSC’s work simply ignore the immense time and expense that goes into a case of this magnitude which affects every person throughout the Gulf Coast. Aside from the sheer volume of documents and deposition work, there are complex layers of arguments that the PSC must maneuver so folks hurt by the disaster have their day in court. Across the aisle are some of the most powerful companies in the world that would love nothing more than to have claims dismissed and damage awards chopped down. Without the PSC’s efforts, Gulf Coast residents would be at the mercy of the GCCF and BP.
• BP’s Profits Climb to $23.9 Billion. As many Gulf Coast residents may recall, rumors were rampant that BP would go bankrupt as a result of the Deepwater Horizon oil spill. Those same residents felt pressure to settle early to ensure they would get at least some form of compensation from the oil giant. There were even calls to limit BP’s liability in order to protect the company and its shareholders, and to ensure that the company would not go bankrupt. Now, just over a year later, BP has recently reported that its net profits exceeded $23 billion in 2011 following the Deepwater Horizon oil spill.
Perhaps a lesson can be learned from this – maybe America should focus more attention on helping the people, and their businesses, that were devastated by events caused by negligence rather than the companies that cause them. After all, those huge companies will come out fine – they have billions of dollars. Unfortunately, ordinary folks do not have that same luxury.
Source: The Economic Times, London
• BP Liable For Civil Penalties For Oil Spill. Judge Barbier ruled on February 22nd that BP PLC and one of its minority partners in the blown-out Macondo well are liable for civil penalties under the Clean Water Act. He ruled that Transocean Ltd., the rig owner, may be liable under the same law as an “operator” of the well. But the judge said he couldn’t decide at this juncture – before trial – whether Transocean meets the definition of that term.
The Justice Department argued that BP, minority partner Anadarko Petroleum Corp. and Transocean are each liable for per-barrel civil penalties for oil discharged from the well. Judge Barbier rejected Anadarko’s argument that oil discharged from Transocean’s rig, not the well. “Pressure within the earth drove hydrocarbons up the Macondo Well, through the (blowout preventer), and finally out the riser,” the judge wrote. “Thus, the uncontrolled movement of oil began in the well. The riser and (blowout preventer), by contrast, were merely passive conduits through which oil flowed.”
Judge Barbier also ruled that BP and Anadarko — but not Transocean — are “responsible parties” under the Oil Pollution Act for oil that flowed from beneath the surface of the water. In response to the ruling, a BP spokesman said that the company is committed to paying all legitimate claims and helping economic and environmental restoration efforts in the Gulf Coast. That is most interesting considering that BP has fought long and hard in this litigation to do exactly the opposite.
Source: Associated Press
• BP Safety Head stepped down. BP safety committee head William Castell has stepped down and plans to leave the board in April. Castell, chair of BP’s safety, ethics and environment assurance committee since 2008, stated he would not seek re-election at the company’s annual meeting in April. Andrew Shilston will succeed Castell in the role of senior independent director, the company added, while Ann Dowling, head of the Department of Engineering at the University of Cambridge, will join the board and safety committee.
The changes follow significant adjustments to the company’s board over the last two years, many of which came after BP’s Macondo well gushed 4 million barrels of oil into the Gulf of Mexico after an explosion in April 2010. Castell was head of the committee at the time of the spill, when BP’s safety standards were vigorously questioned. He passed leadership of the committee to fellow board member Paul Anderson in December 2011.
Investors expressed their displeasure at Castell last year when 25 percent of investors who voted ahead of BP’s annual meeting, representing 60 percent of shares, voted against his re-election.
• The Defendants Want to Hide Critical Documents and Evidence From the Public. As the phase one liability trial drew closer, BP, among other Defendants, worked to seal any evidence of its bad conduct from ever reaching public airwaves. At the same time, BP was spending millions in new advertising in an effort to control public perception of the company, and its response to the oil spill. As the trial has come closer to a reality, BP’s defense strategy has shifted to turning the phase 1 proceeding into a secret trial. If the company cannot seal testimony and documents from public viewing, it moves to option 2 – strike otherwise critical and relevant evidence from the record.
While the stack of motions to exclude evidence and testimony, at press time, was still under consideration by Judge Barbier, Magistrate Judge Sally Shushan told the parties at a conference that the Court intended to conduct a public proceeding. Judge Shushan followed up with an order saying that unless a party to the litigation can demonstrate that an exhibit causes “serious competitive harm” — and she noted that the Court expects such instances to be “very few in number” — all of the nearly 21,000 exhibits proposed so far will be entered into the record. Similarly, all excerpts of the 303 depositions deemed relevant to the trial will be entered into the public record, except for sections of testimony directly linked to documents deemed confidential. “The emphasis at trial will be on the public disclosure of all information,” Judge Shushan has written.
As the parties prepared for the massive trial to determine the proportion of fault among the companies involved in the ill-fated Macondo well, issues of evidence and the scope of the trial have been key. BP has already been declared a “responsible party” for the April 2010 explosion and sinking of the Deepwater Horizon drilling rig. But in the liability trial, BP’s goal has been to limit the amount of blame that falls on the company and to minimize the chances that it will be found to have acted with “gross negligence” or “willful misconduct.”
Findings of egregious fault would subject BP to enhanced penalties under the Clean Water Act of $4,300 per barrel of oil spilled instead of $1,100 per barrel, and would increase the risk that Judge Barbier could impose punitive damages on the company. As a result, the battle by BP has been to limit the most damaging pieces of evidence and testimony and make it more difficult for federal and state governments and other Plaintiffs to prove gross negligence or willful misconduct.
Depositions revealed that BP executives were rewarded for cutting costs, that a process safety specialist was fired in November 2009, and his boss was asked to leave the company shortly thereafter and was given “hush” money.
Source: The Times-Picayune
• New Publically Released Documents Reveal BP’s Efforts to Conceal the Spill Flow Rate. It’s long been suspected that BP low-balled oil flow estimates during the 2010 disaster. Indeed, aside from the public relations nightmare the spill was creating, BP had a very good reason to conceal the actual spill rate numbers– federal fines and penalties against BP are based on the volume of oil spilled into the Gulf. Now, on the eve of trial, recently disclosed company correspondence proves that BP officials knew how disastrous the spill could be — and chose to hide that critical information – and obviously that is extremely damaging to BP’s defenses.
Internal e-mail messages disclosed in a federal lawsuit reveal that as the Deepwater Horizon rig sank on April 22, 2010, an expert reported to BP that the well would spill 82,000 barrels a day if unobstructed. Instead of sharing the data with government officials preparing the disaster response, BP executives demanded that the estimate be kept secret. Shortly thereafter, the first official spill rate estimate of 1,000 barrels a day was released on April 24, 2010. Since that time, an expert task force determined that the true flow at that time was 62,000 barrels a day, a figure closer to the maximum flow estimate BP had received on April 22. That’s something Justice Department officials who are pursuing criminal and civil probes of BP should take into account. They need to make sure the company pays appropriate fines to repair the damage it caused, and that anyone who broke the law is brought to justice.
BP’s efforts to spin the flow rate number and minimize the spill were evident later in the disaster. But the new documents are the first public indication that BP knew early on that the spill would most likely be enormous. Well into the summer of 2010 company executives were still dodging the flow rate issue. That September, BP chief operating officer Doug Suttles told The Times-Picayune that estimating the flow rate “is horribly difficult to do, you can’t put a meter on it.” Suttles insisted that the flow rate was irrelevant to the disaster response anyway, because BP had marshaled adequate resources even without having an estimate. “I know this is so hard to believe,” Suttles said of his argument.
It was hard to believe because it wasn’t true. BP’s efforts to hide the gravity of the disaster affected the urgency and magnitude of the government response. The public is going to learn during the trial with intimate detail just how much BP hid, and how bad BP’s conduct was. For that, the company must be held accountable.
• MOEX Offshore $90 Million Partial Settlement. MOEX Offshore 2007 LLC has agreed to settle its liability in the Deepwater Horizon oil spill in a settlement with the federal government valued at $90 million. About $45 million of the money will be focused on the Gulf of Mexico area, through penalty payments or expedited environmental projects, including at least $6.5 million that will be used to acquire and protect sensitive coastal property in Louisiana.
The proposed settlement, which is subject to a 30-day public comment period, calls for MOEX to pay $70 million in civil penalties to resolve violations of the Clean Water Act resulting from the spill, and to spend $20 million for land acquisition projects in several Gulf Coast states that will preserve and protect habitat.
MOEX Offshore, the U.S. subsidiary of Japan’s Mitsui Oil Exploration Co., owned 10 percent of BP’s Macondo well. MOEX and Anadarko, which owned 25 percent of the well, were investors in the BP-run project and had input on financial questions. Last May, MOEX entered into a separate settlement with BP, agreeing to pay $1.1 billion that BP used to cover damage claims. Anadarko entered into a similar settlement with BP last October, for $4 billion.
Terms of the settlement won’t affect the potential liability of, or recoveries from, other parties involved in the spill. “The Department of Justice has not wavered in its commitment to hold all responsible parties fully accountable for what stands as the largest oil spill in U.S. history,” said Attorney General Eric Holder. “This landmark settlement is an important step — but only a first step — toward achieving accountability and protecting the future of the Gulf ecosystem by funding critical habitat preservation projects.”
The settlement calls for $45 million of the penalty money to go to the federal government, where it will be used to replenish the Oil Spill Liability Trust Fund, to pay for response actions, cleanup and damages caused by future spills. The remaining money will be divided among the states, with Louisiana getting $6.75 million, $5 million each going to Florida and Mississippi, and $3.25 million to Texas. The company also agreed to secure and protect properties of ecological significance in Louisiana, Texas, Mississippi and Florida, with the land to be either transferred to or acquired by state governments, non-profit groups, land trusts, or other appropriate entities.
The proposed settlement is subject to a 30-day comment period and final court approval.
Source: The Times Picayune
• House Votes to Wall Off Penalty Money for Gulf Restoration. Billions of dollars in Deepwater Horizon spill fines would be walled off in a special trust fund that could only be tapped to pay for Gulf Coast restoration, under a measure approved by the U.S. House of Representatives. This will dedicate 80 percent of the resulting Clean Water Act fines to Gulf Coast economic and environmental restoration.
The Senate must take up and approve its own legislation. Sen. Mary Landrieu (D-La.), sponsor of the RESTORE Act in the upper chamber, put the full committee-passed bill forward as an amendment to the Senate transportation bill.
The House bill calls for devoting 80 percent of the fines, which could exceed $20 billion, to be deposited in a newly created “Gulf Coast Restoration Trust Fund.” Only an act from Congress could draw from the fund and only for the purpose of economic or environmental restoration in the five Gulf states of Alabama, Florida, Louisiana, Mississippi and Texas.
Source: Associated Press
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